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Home Front Economy

Japan wants US use public funds in fiscal crisis

2008-03-24

TOKYO - The United States should use public funds to shore up its financial system and calm recent market turmoil, Japans financial services minister said in an interview published Monday.

Everybody's pretty easy about Uncle Sugar's money ...

It is essential (for the US) to understand that given Japans lesson, public fund injection (into the financial sector) is unavoidable, Yoshimi Watanabe told the Financial Times.

He said Japan was ready to share its experience with the United States at the Group of Seven meetings of finance ministers, who are due to gather in Washington next month. We are prepared to take coordinated action if necessary, he said. We must recognise that the current crisis is not as straightforward as past dollar crises.

The same newspaper reported over the weekend that US and European central banks were considering buying mortgage-backed securities to resolve the credit crisis triggered by a wave of US home loan defaults.

The problems have pushed the dollar down to a 12-year low against the yen and to the lowest-ever levels against the euro, causing concern in Japan and the eurozone about the impact on exports.

Japan suffered a deep and prolonged banking crisis in the 1990s after the countrys asset bubble burst, leading to the failure of a number of high-profile financial institutions. The Japanese government injected capital to the banking sector in an effort to shore up markets and struggling financial institutions, some of which were nationalised to prevent their collapse. The problems came amid Japans lost decade of stagnant growth and on-off recession in the 1990s, from which the country is still recovering.

Posted by:Steve White

#12 Darrel is right.

And I'd add much of the money came from Japanese and other Asian investors through so called carry trades. Asian investors are loosing their shirts through a double whammy of unsaleable debt and large currency loses.

The problem is even bigger in Australia and curiosly we don't even rate a page on wikipedia's list of property bubbles.

http://en.wikipedia.org/wiki/Japanese_asset_price_bubble

Interesting times indeed.

Posted by: Phil_B 2008-03-24 18:53

#11 The deficit is down, we aren't selling nearly as many Treasuries as we used to. I know I'm ignorant as a pig in mud about matters financial, but I'm not nearly as worried about this as I would have been a decade ago.

Posted by: trailing wife 2008-03-24 16:45

#10 WE: At the last T-bill auction both the Japanese and Chinese did not buy. This is the single most scary thing that has occurred in the last 30 days as far as I'm concerned.

Not at all. The reason they did not buy is probably that Treasury rates are at all time lows, due to US investor fears about other kinds of debt. What we're finding out is that there is plenty of money to fund the national debt. And not enough money to fund the real estate bubble that has taken home prices into the stratosphere - from an affordability standpoint. Especially when mortgage security holders are getting 50 cents on the dollar upon foreclosure for the properties back the securities. When cockamamie lending policies are turfed, there will be plenty of interest in US debt securities from Americans and foreigners alike.

The problem is that these moronic lending policies are being perpetuated even as I write, which is why investors are staying away. Pension funds, mutual funds, endowments, et al are all watching and waiting for sanity to return. Just because you can sell toxic waste to someone doesn't mean you should make toxic waste - but that's what the banks were making and selling to investors for years, aided and abetted by the ratings agencies. After a while, they even began drinking their own Koolaid.

Posted by: Zhang Fei 2008-03-24 14:23

#9 Darrell, all of that is true but one point. The banking geniuses who caused this bailed out months ago. They got their money, they left everyone holding the bag.

Posted by: Formerly Dan 2008-03-24 13:31

#8 "causing concern in Japan and the eurozone about the impact on exports"
That's what it's about -- they're worried about their share of a shrinking pie. Don't worry, Mr. Watanabe, my home is secure and I will probably buy another Toyota in a few years. But if you insist on raising my taxes to bail-out a bunch of idiot bankers who chose to ignore the basics of risk, then you can count on it being a much smaller Toyota with fewer options. Good luck.

I don't intend to be back here to argue this today, so let me put my two cents in here:
1. If you bought a bigger house than you really need, you made a common mistake.
2. If you bought a bigger house than you really could afford, you were dumb.
3. If you gave somebody a bigger mortgage than they could handle, you made a serious business error.
4. If you bought a package of these business errors, you are not a savvy investment banker -- you are an idiot who has been posing as one. You do not deserve to come through this unscathed.

Posted by: Darrell 2008-03-24 12:15

#7 Whatever. The Japanese pissed away god only knows how much yen - maybe a trillion or so? - "dropping cash from helicopters". It *didn't work*. It didn't work on a scale similar to the New Deal debacle. If this half-pint half-wit thinks it's such a keen idea, he can pillage his own fisc for the dosh.

Posted by: Mitch H. 2008-03-24 10:35

#6 Uh, wait a minute. Not only has Japan experienced this same crisis and knows what NOT to do, they have a tremendous interest in US economy since they are the single largest investors in US Treasuries, followed by the Chinese. It is very much in their interest to make sure the US economy doesn't collapse since they are the primary creditors of our ongoing folly of living beyond our means on their credit. If they decide to quit buying Treasuries, the whole house of cards shuts down. At the last T-bill auction both the Japanese and Chinese did not buy. This is the single most scary thing that has occurred in the last 30 days as far as I'm concerned.

Posted by: Woozle Elmeter 2700 2008-03-24 09:42

#5 The Fed is already injecting $200 billion into the banking sector.

The US central bank said it was offering the money in a new Term Securities Lending Facility auction, which will allow a group of 20 large investment firms to borrow the money for a 28-day period.

Last week the Federal Reserve said it was making $200 billion available to US financial institutions in a bid to boost the struggling US financial system. "The Fed is now getting creative with solutions to the credit crunch," said Andrew Busch, an analyst at BMO Capital Markets. "The market can now provide to the Fed the stuff that they don't want ... [such as federal agency mortgage-backed securities] ... for the stuff they want [US Treasury securities]." Stephen Gallagher, an economist at Societe Generale, a French bank, said the move was aimed at helping banks stuck with mortgage securities that could not easily be traded.

Posted by: ed 2008-03-24 09:20

#4 Um... no.

We have our own government trying to give all our hard earned money away already.

Leave the "crisis" be guys. You are only making it worse with your constant mucking.

Posted by: DarthVader 2008-03-24 07:55

Everybody's pretty easy about Uncle Sugar's money ...

It isn't "Uncle Sugar's" money. It's the tax payers money. We the people and all that.

Posted by: Clolump B. Hayes9635 2008-03-24 07:31

#2 Oh yeah - advice from Japan. What a great idea. This is the country that turned a real estate bubble into a decade-long zero growth period. Government bonds paid zero percent for a long time, and people kept buying them.

Posted by: gromky 2008-03-24 06:39

#1 TAIPEITIMES > JAPANESE MINISTER TELLS CHINA TO MAKE YUAN MORE FLEXIBLE.

Posted by: JosephMendiola 2008-03-24 01:19

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