thanks.  these updates are great.  Jeff




Robert Johnston
10/27/2000 04:40 PM
To: Gary Hickerson/HOU/ECT@ECT, Jeffrey A Shankman/HOU/ECT@ECT
cc: Darren Delage/AP/Enron@Enron, William Stuart/HOU/ECT@ECT, Trena 
McFarland/NA/Enron@Enron, Pushkar Shahi/HOU/ECT@ECT, Steve 
Jacobellis/NA/Enron@Enron, Shane Dallmann/LON/ECT@ECT, Aaron 
Armstrong/LON/ECT@ECT, Martina Angelova/LON/ECT@ECT, Jurgen Hess/LON/ECT@ECT 
Subject: Japan

Latest overview from our regular Tokyo source...

RJ

1. Mori,s (eventual) resignation shouldn,t have much impact on the Japanese 
economy or
yen-dollar beyond a brief knee-jerk reaction. Regardless of the new 
government, 
it seems clear Miyazawa and his surrogates will continue to control economic 
policy 
and the figurehead nominally in charge of things doesn,t really matter. 

2. The bottom line is the Japanese are itching for another joint intervention.
The weak euro is hurting Japanese export sales in the euro zone and beyond
and they would like to draw a line in the sand near 85 euros to the dollar
and 92 yen to the euro. Problem is, the United States ) in the person of
Larry Summers ) wants intervention used only as a tool of last resort, and
only when central banks can use the element of surprise to spook market
players into euro buying and maximize the bang for their buck.

3. Will the Bank of Japan participate in another round of massive euro buying?
Yes, but only when the U.S. participates in full measure. At what level will
that multilateral intervention next occur? Very difficult to say. If the
Japanese and some in Europe had their druthers they would have been in there
this week. Most analysts say the market has drawn a line in the sand at 80
euros to the dollar and if the central banks let the euro sink below that
level they,ll have a devil of a time getting it back up.

Our judgement is that they have to act above 80. To try to narrow our
prediction beyond that would, I think, be foolhardy.

4. As to yen-dollar, we see some further yen weakness ahead for several 
reasons.
The wave of bankruptcies  in Japan shows no sign of abating. And they,re
getting bigger, with Kyoei Life,s demise the largest yet (4.5 trillion yen).
While big bankruptcies are inevitable and some see a silver lining because
Japan is finally trimming the dead wood from its economy, the effect on
market sentiment has been grim. The Nikkei remains lost in a dark, dark wood
for that reason, and in sympathy with the NASDAQ.

Oil prices and the events in the middle east are also dollar positive on
balance, because of the flight to quality and the fact that much of the
world,s oil is denominated in dollars. And the Japanese first half reporting
season ended Sept. 30, taking away a big incentive for exporters to
repatriate dollars.

So we see a somewhat weaker range for the yen over the near term ) let,s
call it 108-112, with a bias towards the bottom of that range. There,s some
heavy resistance to the dollar  around 111.73, this year,s peak. So while the
dollar might poke through 110 some time soon, the bulk of trading should be
in the 108-109 range.

Longer term, rising profits on the export and high-tech sectors and continued
strong capital investment will pull the economy slowly out of the woods. And
we continue to look for a stronger yen next year.

5. On BOJ policy, don,t look for another rate increase any time soon. The BOJ
took a lot of flack for the timing of its August increase and they made their
political point about independence. Our outlook is for an even keel on
monetary policy near term. No change at least through the end of this year.

6. Technology notes: Japanese semiconductor makers are set to announce strong
earnings growth in the year ended Sept. 30. NEC, Toshiba, Fujitsu, Hitachi
and Mitsubishi Electric chip divisions will all report operating profits up
between 20 percent and 60 percent. (

And you may have seen where four Japanese companies ) Matsushita Electric,
Toshiba, Sony and Hitachi are entering into another venture to create
interactive broadcasting and storage datacasting ) eventually producing
advanced TV set- top boxes (STBs). These are the next generation boxes that
turn TVs into computers, enable Internet access via TVs, enable users to
access and store music, videos and games and conduct e-commerce transactions,
remote in hand, from their easychairs.