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IP: Re: Clinton Administration "Reverse Course"
From: David Farber <farber () central cis upenn edu>
Date: Sun, 17 Sep 1995 07:47:47 -0400
Date: Sun, 17 Sep 1995 17:33:33 +0900 From: sja () glocom ac jp (Stephen J. Anderson) This past week I met a US Embassy staff person and asked questions about the visits to Tokyo that sent the yen plummeting. I got little, but did write down the words that the Administration was "consolidating" its trade agreements, which I interpreted as a confirmation of the continuing "reverse course." I also came back to the office trying to reconstruct the motives of the U.S. Treasury people. I then opened the file I save on finance and bond markets. I found an WSJ article from 22 April 1988 entitled "Task Force's (Nicholas) Brady Says Japanese Sales of U.S. Bonds Touched Off Oct. 19 Crash" (read, 'Black Monday, 1987). With similar fears in mind, the Clinton reelection campaign has now set its course for November 1996. That course needs an American. economy with stable long-term interest rates depending on bond purchases by foreign investors, and these investors still include a significant percentage of Japanese insurance companies and assorted banks. My question is about the Treasury Department position, or the fears and motivations of Robert Rubin, Jeff Garten, Joan Spero, and the interest rate watchers. Their rush to act seems related to the formative (1987?) experiences of the Wall Street faction in the Administration. There may even be a compelling reason (or threat), in terms of Clinton's reelection, for seeing this role of the Japanese investors as a crucial linkage. The bond market, and Japanese purchases, were mentioned not only by Jim Mann of the LA Times (reprinted in Japan Times), but also in a front page article in the Nikkei last Sunday. In fact, I would rather see DFS comments and debate about the percent of Japanese purchases of Treasury offerings, and the types of deals made this summer about Japanese finance cooperation (if any) rather than an ersatz debate about the banking industry here. I recall a long conversation with a Export-Import Bank official in January about the need to "rationalize" the finance industry in Japan. The big banks do not worry about a crisis--they see it as an opportunity to swallow up the small, inefficient local institutions. The overpublicized run on a local Tokyo credit union was almost staged by the Ministry of Finance in order to put pressure on Governor Aoshima, as well as the bigger banks, to lend more money for a bailout. From my seat, it looked like Kabuki to me. A key question that arises is whether there was a quid pro quo. Japanese purchases of US Treasury bonds back in 1987 was somewhere near forty percent of the offerings. Can some finance analyst on DFS tell me, or check now, about where the current amount stands? Better yet (in hopes of finding the smoking gun), have there been any changes lately? Steve Anderson Center for Global Communications International University of Japan Tokyo
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- IP: Re: Clinton Administration "Reverse Course" David Farber (Sep 17)