-Caveat Lector- from: http://www.aci.net/kalliste/ Click Here: <A HREF="http://www.aci.net/kalliste/">The Home Page of J. Orlin Grabbe</A> ----- Japanese Finance Japanese Bond Mystery: Why Such Low Yields? The suckers keep on buying risky government debt. How is it possible for the yield on the 10-year benchmark Japanese government bond to be just 1.87 per cent? The laws of economics appear once again to have been suspended in Japan. After all, since August 1992 the government has announced 10 stimulus packages worth �120,000bn (�737bn) - equivalent to 24 per cent of Japan's gross domestic product. Not everything announced is actually spent, of course, but the impact of this fiscal profligacy on Japan's gross debt has nonetheless been devastating. By the end of this financial year, the government's gross liabilities are expected to reach a staggering �600,000bn - equivalent to 125 per cent of GDP. In 1990, the figure was less than 60 per cent. Japan will, therefore, have the dubious distinction of being the most highly indebted member of the Organisation for Economic Co-operation and Development. Hence, Moody's, the credit rating agency, downgraded Japan's sovereign debt. Yet the markets appear unconcerned. True, the yield has risen from its low in September last year of 0.655 per cent, when investors were implying that not only was the Japanese government the most creditworthy in the world but the most creditworthy in the history of the world. But even at its current rate, the markets appear to be saying that Japanese debt has the lowest risk of default of any sovereign debt. One argument put forward is that the gross figure does not reflect the true position, because it ignores the state's assets, such as those in the social security system. If these are included, net debt is about 45 per cent, the lowest in the OECD. There are two problems here. First, it is far from clear that the social security system is properly funded - and it may face significant liabilities. Second, many of the assets held by the government - particularly land - are worth much less than their book value. Another argument is that the market can cope with all this additional supply because of strong demand. To international investors, a yield of 1.87 per cent may not sound much; but for domestic investors, confronted with deposit rates of 0.3 per cent and consumer price deflation of 1.3 per cent, it looks princely. Simply put, there is nowhere else for Japanese investors to place their money other than JGBs. They certainly dare not risk their savings in foreign deposits while the yen remains so volatile. As was shown on Friday, the 5 per cent annual return on a dollar account can be wiped out in a single day. The potential greater return is simply not worth the risk. Finally, when private investors are unable to take up the slack, there are always quasi-governmental institutions ready to purchase excess supply. And if that does not work, so the argument goes, the Bank of Japan will be induced to buy. The government, say the bond market bulls, cannot afford to let the bond market crash. This looks complacent. Even net debt is on an explosive and unsustainable trajectory. The current rate of about 45 per cent of GDP compares with just 4 per cent in 1992. All this might seem academic to international investors: after all, non-domestic investors hold much less than 10 per cent of outstanding JGBs. Understandably, they have been put off by the low yield. Instead they have been consistent buyers of Japanese equities. (Alas, their timidity has cost them dear: the return on JGBs in the past decade has been a little more than 100 per cent, while that on Japanese equities has been negative.) The trouble is that international investors cannot ignore the implications of a rise in long-term interest rates. Japanese equities would be hard hit. Much of Japan's corporate sector is heavily indebted and would struggle to deal with higher rates. The JGB market looks less like a mystery than an accident waiting to happen. The question is timing. Historically, governments can continue down unsustainable fiscal routes for some time until market discipline is exerted. But the later such discipline is applied, the more painful the reckoning. The Financial Times, November 29, 1999 Violence in Britain Naked Man Hacks Church-Goers with Sword and Knives Shows the urgent need to ban public ownership of sharp instruments. A NAKED man armed with a 3ft samurai sword and a knife walked into a Surrey church yesterday and slashed indiscriminately at worshippers. Six people, aged between 60 and 78, suffered slash and stab wounds. They were described as "stable" in hospital last night. One man had three hours of surgery for "horrific" facial injuries. Five others were hurt in the crush as the congregation fled. Four hundred people were attending Mass at St Andrew's Roman Catholic Church in Thornton Heath when the swordsman, described as a 26-year-old local man, burst in. Panic spread as mothers rushed to a neighbouring hall to fetch their children who were attending Sunday School. Pc Tom Tracey, an off-duty policeman, ripped a 5ft long pipe from the organ to help overpower the man, aided by another member of the congregation who used a cross. He said: "The first thing I saw was people rushing to get out of the various exits of the church. "I looked over and I saw a man wielding a sword around. People were rushing past and myself, along with several other male members of the parish, subdued the man just as he was near the altar. He was absolutely wild." Pc Tracey, who was attending Mass with his 13-year-old daughter, said: "Five minutes previously I was singing the psalm and the next thing you're fighting a sword-wielding assailant." Paramedics described how they were met with a scene of "blood and panic" as people scrambled across the slippery bloodstained floor to leave the church. Among the most seriously injured was a 55-year-old man. Paramedics found him after following a trail of blood. The victim was slumped on the pavement two streets away with deep slashes to his face, neck and jaw. He had also lost a finger and thumb in the attack as he raised his hand to protect himself. Kambiz Hashemi, consultant accident and emergency specialist at Mayday Hospital in Croydon, south London, said the victim had suffered the most horrific injuries he had ever seen. He said: "It was a very sharp, very powerful samurai sword that made a very clean cut. It is a miracle that his main artery was not cut." Marie Parcou, 66, from Thornton Heath, had to pull her husband, Jules, 73, to the floor to stop the attacker "slicing his head off". She said: "I was just standing next to my husband and all of a sudden the man repeatedly cut him with his sword. My husband was spouting blood and I had to pull him to the ground before the maniac chopped his head off." Charles Ssuna, 35, a local businessman who was at the front of the church, recalled seeing blood on the floor and a man with his mouth slashed up to his cheek. He said: "I saw the man completely naked with a long sword. It was gold and metal. He was just screaming but I couldn't hear what he was saying over the screams of the congregation. It is unbelievable. I am still scared. If I were not a real Christian I would never come back." Tino Hernandez, 35, a press officer for Enfield Council, said: "I saw him slash at least 10 people. The two that stick in my mind are a pensioner who was slashed across the arm. I don't know if it was severed but it seemed a terrible injury to me. I also saw a man slashed across the face and to see someone's face split open and the blood pour out is not the sort of thing you ever want to see again." Nanette Frederiksson, a nurse who was taking a children's service near the scene of the attack, told of "a mass of stampeding people rushing through the doors in hysteria". She said: "There were at least 50 children at the liturgy. The door flew open as parents tried to make their way to get their children. It was mass hysteria and everyone was trying to escape. "I picked up some of the children, one of my own and two others, and went rushing out of the church hall. I saw an elderly lady badly injured across her face. Her family was with her. I went inside a house and there was already a lady in there who had been slashed on her back." Evening Mass took place yesterday but was conducted at a Salvation Army hall where prayers were said for the injured. Fr John O'Toole, one of the three priests to take the service, said: "We can move so quickly from joyful, to ordinary, to tragic very quickly and it's difficult for all our emotions to catch up so I am sure we are all numb with shock. It is not a time for words." Canon John Lennon, 78, who was celebrating Mass yesterday morning, said: "The choir was about to start singing when all hell broke lose. To my surprise I saw a number of men rushing down the aisle including, apparently, a man stark naked wielding a machete." He said: "I saw someone picking up an organ pipe and bashing him about the head. Five people grabbed him very quickly. I said to someone, 'for God's sake ring the police'. The police were there in about five minutes I suppose. I was waiting for the panic to subside. I was determined to finish the Mass. You don't lightly abandon a Mass unless there is a nuclear explosion. A mere character with a machete wouldn't put me off." Plastic surgeons at Mayday Hospital will today begin rebuilding the face of the most seriously injured victim, who suffered a sweeping cut from his jaw to the back of his neck. He is expected to suffer permanent difficulties in eating and speaking. He was transferred to intensive care last night after a series of operations. One woman in her late sixties suffered a fractured skull from a blow to her forehead. A woman in her seventies sustained a deep injury to her right shoulder. A man in his sixties suffered cuts to his shoulder and neck, and a 36-year-old man suffered slashed tendons and a fractured forearm. Jack Straw, the Home Secretary, last night extended his "deep" sympathy to the injured and their families. A few volunteers were last night helping to clean up the church, where splashes of blood could be seen on the tiled floor in the aisle and in several pews. Hymn books and Mass books lay scattered across the benches and on the floor, along with personal items including a suede glove. The London Telegraph, November 29, 1999 World Trade Organization Environmentalists to Trash Seattle Global bureaucracy meets global inanity. Buy popcorn and enjoy the show. THE city which gave the world Boeing, Microsoft and Starbucks coffee blinked in disbelief at the weekend as 50,000 critics of global capitalism arrived threatening to paralyse the world trade talks with "the protest of the century". "Whose idea was this?" asked the Seattle Times. What was the World Trade Organisation doing bringing thousands into a crowded city the week after Thanksgiving, "mucking up Christmas shopping, immobilising the city centre and opening the door to havoc?" The present disenchantment with the organisation and disagreement between its 138 members - who could not even agree on an agenda for the talks - was not foreseen in 1998 when President Clinton offered to host the event that would set the trade agenda for the new Millennium and place the United States at the centre of a globalising economy. Since then the organisation, whose disputes panel has become the highest form of arbitration before the onset of war, has fanned the flames of resentment among environmentalists and developing countries. It has penalised Europe for favouring the bananas of the Windward Islands and banning beef injected with hormones. It has even found against America for banning shrimps caught by Indian and Pakistani fishermen who destroy turtles in their nets. Michael Meacher, the Environment Secretary and one of four British ministers at the talks, has described them as a "high wire" act, capable of collapse and fraught with problems if Europe is prevented from exercising its discretio n to ban GM crops. Stephen Byers, Trade Secretary, has identified several pressure points: agriculture, where European Union farm subsidies will be under fire from America; US insistence that labour conditions in poor countries should be a reason for excluding goods; and US insistence that rules on free trade should take precedence over 13 international environmental agreements. Mike Moore, embattled head of the trade organisation, launched a campaign of conciliation aimed at environmentalists and the developing world, conceding that "not all our critics are wrong". At the weekend, it was the turn of the protesters and 2,500 heard speeches from such opponents of globalisation as Jos� Bov�, leader of the French Peasants' Union, who was imprisoned for demolishing a branch of McDonalds. A standing ovation at Seattle's Benaroya Hall greeted a call by M Bov�, who makes Roquefort cheese which attracts 100 per cent tariffs in America because of the European ban on beef hormones, for "no globalisation without representa tion". Left-wing groups and anarchists plan a mass illegal non-violent protest tomorrow that will merge with a legal march by trades unions with the goal of shutting down the organisation for the day. A shadowy "deep green body" called the Anarchists' Action Collective issued a call to arms in the radical Seattle Weekly: "Get up off your knees during the WTO convergence in Seattle. Fight back and don't get caught!" The London Telegraph, November 29, 1999 ----- Aloha, He'Ping, Om, Shalom, Salaam. 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