JIN-482 -- Lehman collapse will test the safety of the Japanese economy

J@pan Inc Newsletter
The 'JIN' J@pan Inc Newsletter
A weekly opinion piece on social, economic and political trends
in Japan.
Issue No. 481 Wednesday September 17, 2008, Tokyo
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The world watched nervously as things unraveled on Wall Street
and as the banks in Japan again opened their doors after the long
weekend, the fallout hit... hard.

The Nikkei 225 index fell 5 percent to a three-year low following
Wall Street’s historic day of trading. Following Lehman Brothers
filing for bankruptcy, it became apparent that six of the top 10
unsecured creditors were Japanese banks. Aozora held the unenviable
position of No. 1 with $463 million in unsecured loans.
The shares of both Mitsubishi UFJ and Mizuho dropped 11 percent
while the Bank of Japan stood up and threw 2.5 trillion yen
($24 billion) of liquidity at the mess.

Meanwhile Prime Minister Fukuda called an emergency meeting with
key ministers. No doubt the Bank of Japan’s two-day policy board
meeting, which ends today, was also taken over by talks centered
around the events.
While only the brightest of optimists felt that we had hit rock
bottom before, the weekend’s events were quite extraordinary.
Following on from the Freddie Mac and Fannie Mae bailouts, the
fire sale of Merryll Lynch and now the Lehman Brothers disaster,
investors were seen dumping shares and scrambling for bonds. Did
I mention that Lehman Brothers was the biggest bankruptcy in US
history? Or that Fannie Mae and Freddie Mac were the two biggest
financial institutions that the US government has ever bailed out?

The reaction yesterday was predictable but the scale of it all
was something else—shares on Wall Street saw the biggest one-day
decline since September 11. Now, the effects of the fallout will
be the real show as investors get a grip on where the ripples
will go.

And of course there’s AIG. If the biggest provider of commercial
insurance in the US collapses it would be the ugliest chapter
yet in the financial crisis. The US government is talking about
issuing an $85 billion loan to ensure that this doesn’t happen
and the markets have reacted favorably. Yesterday, Prime
Minister Yasuo Fukuda downplayed the impact of the Lehman
Brothers bankruptcy asking for calm from Japan’s financial
sector. Fukuda once again beat the same drum, saying, as quoted
by Kyodo News: “It’s important to revive the Japanese
economy” by compiling a supplementary budget under a
comprehensive package of stimulus measures.

The Japanese economy has so far been relatively insulated
against the impact of the problems of the US. Yesterday Finance
Minister Bunmei Ibuki said that he believed the impact of the
Lehmans collapse in Japan would be limited: “Considering the
conditions of each financial institution’s self-owned capital,
we do not have to worry about the Japanese financial system,
though those entities have extended loans to Lehman,” he told
Kyodo News.

The full impact of the last few days’ events are yet to be felt
and it could be sometime before the follow-on effects are fully
realized. The US government seems to be taking an increasingly
interventionist stance in the defense of its economy. While it
drew a line in the sand with Lehman Brothers, it is already
talking of a bailout for AIG. Meanwhile the leaders of the
finance world are drawing more plans to defend themselves—the10
biggest investment banks have already pooled $70 billion of
liquidity in case another one looks like going under.

It’s code red on Wall Street and while the effects won’t be as
severe in Tokyo, the fallout will still be felt. Fukuda’s
bandying about more talk of stimulus packages but that doesn’t
mean much because he’ll be gone in a week or so. The government
has already, and will continue to step in if things get worse.
Yesterday it was 2.5 trillion yen in a swift move to combat the
Lehman Brothers shockwave.
The question now is “how stable will Japan’s economy remain?”
rather than “How volatile will it become?”

Some optimistic analysts have stated that Japan will be one of the
big winners when the global upturn hits. Over the next few months
we’ll see how just how safe a bet Japan really is.

Michael Condon
Editor-in-chief

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-------------Japan Inc is worth every penny!---------------

J@pan Inc is Japan's only English-language business magazine.
Authoritatively chronicling business trends in Japan, each
beautifully designed full-color issue brings you in-depth
analysis of business, people and technology in the world's
second largest economy. Don't miss another issue! JPY 8,000
for 1 year (12 issues) JPY 15,000 for 2 years (24 issues)
Visit http://www.japaninc.com/mgz_subscriptions to subscribe.

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RidgeRunner Niseko International Cricket Competition
20-21 September 2008

Join us as a player, spectator or to party for two days of
fun at Niseko’s annual charity cricket tournament.
Hosted by international greats Dennis Lillee and Rod Marsh,
the event benefits the Tyler Foundation for Childhood Cancer
and Hokkaido International School through our Hokkaido-style-
glamour charity dinner dance and auction.

For more information, please visit www.ezocricketclub.com
or contact Billeigh Waaha 080-3597-6307
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Thanks to our sponsors RidgeRunner, TK6, Paddy Foley's,
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Based in Tokyo and London, O Creative specializes in logos
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The Japan Market Expansion Competition (JMEC) will conduct
information sessions for attendees to learn about the
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Sessions are free but registration is required.
Sep 18th, Oct 1, October 14, 7:30pm-9:00pm,
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www.jmec.gr.jp to register.
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Wednesday 24:

-----------------------------------------------------------
Every PBXL wireless phone comes standard with:
a big color screen,
a 03 Tokyo number,
voicemail,
and more!

Everything you expect from the best office phone system
on the market.

Call today! 03-4550-2557
Get your new phone system in 3 steps: http://www.pbxl.jp/plans

PBXL is Hosted Business Telephony
Monthly seminars at Cisco HQ: http://www.pbxl.jp/seminarstt
More about PBXL: http://www.pbxl.jp/aboutus2
-----------------------------------------------------------

-------------Japan Inc is worth every penny!---------------

J@pan Inc is Japan's only English-language business magazine.
Authoritatively chronicling business trends in Japan, each
beautifully designed full-color issue brings you in-depth
analysis of business, people and technology in the world's
second largest economy. Don't miss another issue! JPY 8,000
for 1 year (12 issues) JPY 15,000 for 2 years (24 issues)
Visit http://www.japaninc.com/mgz_subscriptions to subscribe.

-----------------------------------------------------------

-----------------------------------------------------------

Creative and Web Services

O Creative provides multilingual creative solutions for
print and web.

Based in Tokyo and London, O Creative specializes in logos
and visual identity, branding, brochures, internal and
external corporate communications solutions, multilingual
web sites, web hosting, IT support, search engine optimization,
online marketing, content management systems and customer
relations management systems.

For more information, please visit our website at
www.o-creative.com,
or contact us directly at info@o-creative.com

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The Silver Market Phenomenon: Business Opportunities
and Responsibilities in the Ageing Society

International Symposium on October 3 and 4

If you have been wondering how demographic change is going
to affect your business in Japan, find out more in this
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Technology in Tokyo. This is a unique opportunity to discuss
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around the globe and to meet the inventor of "Paro", a robot
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Brain Training” and many more.
Space is limited, so register quickly.

For more details:
www.dijtokyo.org
www.dijtokyo.org/doc/DIJ-Silvermarket0810_faxform.pdf
Or contact us by phone or e-mail:
03-3222-5077
silver@dijtokyo.org

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STAFF
Written by: Michael Condon, Editor-in-Chief, Japan Inc Magazine
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