Turning Japanese?

September 23, 2008

Pedestrians walk past signboard of MUFG trust bank branch in TokyoHas Japan ever really gotten over the excesses of the late 1980s? Or has the hangover turned into a malaise — in which assets that the banking system there seemed designed to preserve rather than clear — that has made recovery something forever elusive? With the United States facing its biggest bailout ever, U.S. policymakers could learn how not to do things from Japan.
At a trillion dollars, the bailout could jack the U.S. debt-to-GDP ratio up to 70 percent. At the end of last year, the ratio in Japan was 80 percent. A huge bailout bill is scary because the mammoth issuance of new debt should make U.S. bonds, and the dollars they are printed on, worth less, forcing the U.S. to offer ever higher rates of return. 
Has that been Japan’s experience? By the end of the last century, more than a decade after the asset bubble there burst, rates were so low as to hamstring policymakers battling persistent periods of deflation. Even now, despite the huge amount of Japanese debt, the currency — with very low interest rates — remains the favored funding currency for the ever-popular carry trade, where investors borrow yen and lend in a higher-yielding currency, like the Australian dollar. Its debt remains some of the most richly priced in the world. 
And now Japan’s banks, unable to become more dynamic in a home market that was forced to bail them out just a few years ago, appear to be interested in taking on moribund assets abroad. Well, at least they have a lot of experience with this stuff.

Other deals of the day:

* British business and IT consultancy Charteris said it acquired rival SIG Consulting for a maximum 2.5 million pounds in cash and shares.

* Emirates Telecommunications (Etisalat) said it agreed to buy about 45 percent of India’s Swan Telecom for up to $900 million.

* Iridium Holdings has agreed to a reverse merger with a listed affiliate of investment bank Greenhill & Co valuing the satellite-phone provider at about $591 million, the Wall Street Journal said.

* Germany’s RTL bought a 66.6 percent stake in Alpha Media Group for 125.7 million euros ($184.2 million), marking its entrance into the Greek television market.

* Kookmin Bank plans to sell back its 14.9 percent stake in ING Group’s South Korean unit to the Dutch group, and is mulling the acquisition of a domestic brokerage, the South Korean bank said.

* Telecom Italia could be interested in a tie-up with South African mobile phone operator MTN Group, Corriere della Sera newspaper reported.

* British coal miner Caledon Resources said Polo Resources upped its stake in the company to about 55 million shares, or 26.3 percent, from about 54 million shares.

* Sterlite Technologies is in advanced discussions to acquire U.K.-based cabling company Brand Rex for about $55 million, a newspaper said citing sources.

* Abu Dhabi investment agency Mubadala Development said it had bought a 50 percent stake in Los Angeles-based Kor Hotel Group to expand the hotelier overseas.

* Anglo-Australian gold miner Medusa Mining described as “inadequate” a A$182 million ($154.6 million) takeover offer by Hong Kong-based merchant bank Crosby Capital.

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