JIN-183 -- MOF Takes Aim at Western Credit Agencies

J@pan Inc Magazine Presents:
T H E J @ P A N I N C N E W S L E T T E R
Commentary on the Week's Business and Technology News

Issue No. 183
Wednesday, June 6, 2002


++ Viewpoint: MOF Takes Aim at Western Credit Agencies

++ Noteworthy News
- Nasdaq Japan Says It May Leave OSE
- Welcome to FIFA's First Internet World Cup
- File-Swappers Download 75 Million Music Files in Japan: Survey

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++ VIEWPOINT: MOF Takes Aim at Western Credit Agencies

Ratings agencies can't win lately. In the US, Standard & Poor's,
Moody's Investor Services and others have been taking heat all year
for their slow reaction to the Enron meltdown. Both Moody's and S&P
rated Enron at investment grade up to five days before the company
collapsed. Across the Pacific, the Japanese government is raising an
opposite claim: Ministry of Finance officials say the Western
agencies are too quick to discredit Japan.

Does MOF have a point? Does a country with the world's second largest
economy and one-third of the world's savings deserve to be ranked
with Latvia, Poland, Israel and Greece? That's where Japan is ranked
now that Moody's lowered the nation's local currency bond rating two
notches to A2 at the end of May.

Haruhiko Kuroda, the vice minister for international affairs,
certainly thinks his country is getting a raw deal. He's been in a
verbal sparring contest with S&P, sending out press releases to
anyone who will read them. Kuroda takes S&P to task for being too
"abstract," and for not taking into consideration some unique aspects
of the Japanese economy, namely, that 95 percent of Japanese
government bonds are funded domestically, that Japan has a "strong
external balance," and that "while the deficit of the general
government was 32 trillion yen, the excess savings of the private
sector stood at 42 trillion yen in 2001." He also rebuffs S&P's
comparisons of Japan today with the UK of the 1970s and the US of the
1980s. "If you focus on the size of the fiscal deficit alone, you
will miss the broader perspective of the economy," he writes.

Certainly, Japan's massive savings is unique. It buys the government
time, at the very least. But are Western ratings agencies ignoring
this characteristic of the Japanese economy? A close look at Moody's
most recent assessment of Japan shows that it is well aware of the
effect of Japan's savings. The rating agencies says Japan won't face
a government funding crisis over the medium term because of "the
large pool of household savings available to finance government
indebtedness; the consequent ability of the banking system to absorb
substantially higher levels of government debt; and the small scale of
the government's exposure to foreign creditors."

Moody's says that it "believes Japan should be able to sustain
substantially higher debt levels than other developed countries" and
that it "does not expect the Japanese government to allow a banking
crisis to develop." So the government has time. This seems realistic
and sensible. Finally, the kicker that shows that Moody's realizes
Japan's economy is a different animal than those of the West: It says
possible policy actions could include a "wealth tax." If rich people
aren't spending, tax them. It's an idea that seems suited to Japan,
and possibly only Japan. Moody's, at least, is not looking at Japan
through a cloud of Anglo-Saxon economic theory.

-- Bruce Rutledge



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** Nasdaq Japan Says It's Ready to Leave OSE

Extract: Nasdaq Japan said on Monday it would leave the Osaka
Securities Exchange and find another partner in Japan if the OSE
keeps dragging its feet on trading rule changes, according to press
reports. Nasdaq Japan wants the OSE to adopt a 'dealer market'
system, which would give dealers more leeway in trading. The OSE has
been reluctant to make those changes.

Nasdaq Japan is owned by Nasdaq of the US, Softbank and 13

Commentary: Nasdaq planned to have 10 listings a month, which would
have given it 230 today, according to a Bloomberg report. In reality,
it has listed just 95. It is being pushed aside by Jasdaq, which
trades shares of 926 companies. Frankly, there's not enough IPO
action these days to support Nasdaq Japan, Jasdaq and Mothers --
Japan has had more IPOs than the US lately, but the IPOs here tend
to be much smaller.


The J@pan Inc Newsletter -- "Plenty of (Small) IPOs Planned for 2002"

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people in Japan -- invites you to participate in a special ISP/ASP/
DATA CENTERS ad section scheduled for the August 2002 issue.

The August 2002 special ad section will feature companies that are
actively responding to this rapidly changing business scene.
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** Welcome to FIFA's First Internet World Cup

Extract: FIFAworldcup.com has received a record number of hits in the
early days of this World Cup, soccer's governing body reports. FIFA
says the Web site received 165 million page views in the first four
days of the competition -- that is getting close to the 230 million
page views for the whole 2000 Sydney Olympics. "This is truly the
first Internet World Cup," FIFA spokesman Keith Cooper said at a news

Meanwhile, TV ratings in Japan for the national team's game with
Belgium hit 65.4 percent at 7:49 pm Tuesday, while the whole second
half averaged a 58.1 percent rating. That's the third highest rating
for a soccer game in Japan, behind the match between Japan and
Croatia in the 1998 World Cup, which drew 60.9 percent, and the match
with Argentina in the same World Cup, according to the Mainichi

Commentary: We bet Sunday's Japan .vs Russia match will set a new
ratings record. Any takers?



The latest issue of J@pan Inc magazine is now available online!
Click here for the lowdown:

Subscribers can access our hot-off-the-press features, including:

- Doctor in the House
As ever greater numbers of non-Japanese investors move in to take
over more and more distressed assets, we take a look at exactly who's
got money to spend and why they're directing their efforts eastward.
Are they in for a quick buck or looking to heal an ailing economy?

- Walls Come Tumbling Down in Japanese Banking
Kansai Sawayaka Bank was the first acquisition target for
all-American takeover guru Wilbur Ross when its predecessor foundered
in the aftermath of Japan's 1999 financial 'Big Bang.' KSB's fate has
been seen as anything from foreign interference to an intriguing
experiment. Alex Stewart surveys the lie of the land.

- Ross to the Rescue
The deal-making prowess of Wilbur Ross is known far and wide, but how
has he slashed his way through the notorious Japanese red-tape
jungles? And more importantly, why?

- Open Source Free for All
Why are Japan's mainframe makers, brokerages and other big guns so
interested in open source solutions these days? Sam Joseph takes us
into a geeky world that is getting more attention from moneyed

J@pan Inc: www.japaninc.com
Subscribe at: http://www.japaninc.com/mag/subs.html

** File-Swappers Download 75 Million Music Files in Japan: Survey

Extract: About 1.45 million people in Japan have illegally downloaded
75 million music files with file-swapping software, according to a
survey conducted by the Association of Copyright for Computer
Software and the Recording Industry Association of Japan. The groups
released the results of their survey on May 29.

The number of file-swappers has been dropping. There were 1 million
in 2001 and 680,000 in January 2002, the survey showed. But 40
percent of those who were not using the file-swapping software these
days say they would like to try it again.


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SUBSCRIBERS: 5,703 as of June 6, 2002

Written by Bruce Rutledge (bruce@japaninc.com) and Sumie Kawakami
Edited by J@pan Inc staff


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