MW-87 -- Good News -- Bad News

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J@pan Inc Magazine Presents:
M O N E Y W A T C H
Weekly Financial Commentary from Tokyo
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Issue No. 87
Monday, August 2, 2004
Tokyo

CONTENTS
@@ VIEWPOINT: Good News -- Bad News

============================= EA =======================================
Entrepreneur Association of Tokyo - August 3 Seminar

Featured Speaker: Rick Roa
Title: "Taking the Next Step"

Don't miss EA-Tokyo's August 3 seminar featuring veteran Tokyo
entrepreneur, Rick Roa. Rick will be sharing stories and advice taken
from 35+ years of doing business in Japan. Many of Rick's successes
have come from challenging the norms, and as his presentation title
states, he is always "Taking the Next Step."

For more information please visit:
www.ea-tokyo.com or email info@ea-tokyo.com

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@@ VIEWPOINT: Good New -- Bad News

Well, the good news comes from the ongoing saga of the takeover of UFJ.
First there was the court injunction, casting a wonderful ray of light
over the Japanese system. The courts acknowledged the validity of the
contract and were willing to act quickly to protect agreements.

Fantastic!

Second, with all this back and forth in the courts, bids and counter-
bids and general disagreement in the public arena, it has become far
more evident that the FSA has had little or no influence on the players
in these mergers. This is great news.

Finally, here we have SMBC and BTM fighting over UFJ, which is over
30 percent owned by foreign investors. This could be an amazing water-
shed for corporate governance in Japan, especially if SMBC proposes
terms which are better than BTM -- and if the UFJ management declines
to consider them -- one has to suspect that there will be a few foreign
investors, not to mention hedge funds, that will act aggressively to
force UFJ management to consider the highest offer. Watch this space.

And now the bad news:

The yen weakened very quickly last week, ostensibly signalling that a
lot of money is exiting Japan. The reason is officially a slew of
weak economic data over the last few weeks: retail sales were weak
and household spending fell 3.5 percent in June, and 380,000 jobs
were lost -- apparently the largest job loss for a single month
since 1974.

These are not good statistics. That said, they are merely one snap-
shot of an economy that has grown extremely fast over the last
12 months. A period of consolidation would not be totally
unexpected.

Still, we have to concede that these numbers are significantly worse
than one would generally expect for a modest pause in a longer
growth phase. We remain optimistic, but must acknowledge the clouds
on the horizon do concern us enough to review our previous
bullish stance.

August is typically a very slow month in Japan (if not everywhere
in the northern hemisphere), so we will wait to see how the next
few months of data look before becoming too disheartened.

-- John Charles-Decourcy

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STAFF
Written by John Charles-Decourcy (jcd@japaninc.com)

Edited by J@pan Inc staff (editors@japaninc.com)

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