Int national Financial Markets
Oba said that he thought the exchange rate pendulum would come
Fundamentals were to a stop at about 150 yen to the dollar. good in Japan which made it curious that real interest rates in Japan were higher than in the USA. He thought that German unification would lead to higher growth but higher interest rates in Europe. The fall in the Tokyo stock market had affected Japanese banks' ability to lend. This could lead to a squeeze in the USA where the local banks weakened by Latin American debt, the Savings and Loan and property crises, and
were unable to supply all normal day to day lending. One result was the US bank were switching to fee oriented business. Currently Japanese banks accounted for 18% of lending in the
United States. Oba feared that a rise in bond yields in Japan
to 7.5% could precipitate another stock market crash (as the 10% figure had triggered black Monday).
There was probably a ceiling on the Tokyo stock market at
37,000. If the market returned to that level there would be an
avalanche of new paper which would keep it from going higher
(Ishihara).
Inward Investment
+
Ishihara said that the Prime Minister's firm stand on Nissan had
made a strong impression. Japanese companies would continue to
be interested in the UK. The main competition came from Spain
which was thought to be attractive because of low wages and high
growth though neither of these were necessarily true any longer.
The second big competitor was Germany where the Länder made a
big effort in Japan. Japanese companies would not however be
thinking of going into Eastern Europe in partnership with the
Germans. They would prefer to present themselves as an
alternative.
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