now this is telling us the Japanese markets are going to decline?.hence,so will euro,and US then,but the US will be the stronger....or will it?
yen will climb on this news....dollar ?..wall street could go into a selling of Asian stocks spree,hences dollar up,gbp? up too against the yen after a short decline....hmm..to much to talk about on the correlating subjects in the time frame I have left to post my thoughts for next week...shif sees it and I'm sure after looking a bit the rest will see it.I saw it on Friday with price movement on usd/chf and USD/RUB....green eggs and ham for the SAM i am.
;)
Bank Of Japan Chief Warns Against Losing Market Trust Amid "Very Serious" Fiscal State
--Bank of Japan Gov. Masaaki Shirakawa calls the nation's fiscal state "very serious," amid threats from credit-ratings agencies to downgrade Japanese government debt.
--Shirakawa says that if market confidence in Japan's fiscal sustainability weakens, that could spark "negative mutual interaction" among public finances, the financial market and the real economy.
--Shirakawa repeats his stance that the BOJ shouldn't directly buy government bonds, as doing so could backfire, affecting the smoothness with which the government can issue debt.
--Shirakawa says increased fiscal spending may be less effective when people think it isn't backed by new revenue.
(More Shirakawa comments in fifth-eighth, 12th and 14th paragraphs, background in ninth and 10th paragraphs, updates throughout.)
By Takashi Nakamichi
Of DOW JONES NEWSWIRES
TOKYO (Dow Jones)--The head of the Bank of Japan again called on the government to tackle its "very serious" fiscal state Saturday, a day after Fitch Ratings became the latest credit ratings agency to lower the outlook for the nation's burgeoning sovereign debt.
Highlighting the risks of losing market confidence, BOJ Gov. Masaaki Shirakawa said that if investors became doubtful about Japan's fiscal sustainability, it would spark "a negative mutual interaction" involving the nation's fiscal state, the financial system and the real economy that would undermine economic activities.
Shirakawa also dismissed talk of directly purchasing government debt to help the government pay for reconstruction in the aftermath of the March 11 earthquake and tsunami. Such an approach he said could undermine faith in Japan's currency, driving up interest rates and causing instability.
The comments from Shirakawa add to growing signs that policy experts in Japan as well as overseas are feeling increasingly wary about the nation's ballooning public debt. Already twice the size of the nation's annual economic output, Japan's debt is set to grow more in coming months as the government has promised additional borrowing to fund efforts to revive the nation's quake-battered northeast.
"Needless to say, the current fiscal state of Japan is very serious," Shirakawa said in a speech at a Tokyo seminar.
As shown by the debt crises that have hit Greece, Portugal and some other European nations, "if confidence in fiscal sustainability weakens, there would be a negative mutual interaction among three areas---fiscal conditions, the financial system and the real economy---that would have harmful effects on economic activities," he said.
Weaker market confidence in the government's ability to fix its finances could spark "various" events such as falls in the value of government bonds, he said. These developments could undermine confidence in private-sector financial companies, leading to higher borrowing costs, he said, in a veiled reference to Japanese banks that have invested heavily in government debt amid a lack of investment opportunities in a long-moribund domestic economy.
As a result, the economy would suffer, and then "tax revenue would decline, hurting trust in the government's ability to pay down" its debt, Shirakawa said.
Shirakawa's comments came after Fitch on Friday cut its outlook for Japan's sovereign debt to negative from stable, citing the economic risks associated with the country's nuclear power plant crisis and noting that the country's gross debt ratio is already the highest of any country it tracks. The move follows similar actions by ratings agencies Standard & Poor's and Moody's, suggesting the international community is growing more skeptical of Japan's ability to get its fiscal house in order.
The focus of investors is on a long-term plan to overhaul Japan's tax and social security system that the government of Prime Minister Naoto Kan has pledged to announce next month. Growing social security spending to look after the nation's aging population and perennial tax revenue shortages as a result of long-sluggish growth and past tax cuts are among the major reasons for Japan's fiscal plight.
Shirakawa also hit back again at those BOJ critics who have called on the bank to directly buy government bonds to help the Kan administration finance its post-quake reconstruction efforts.
"If the Bank of Japan underwrites government bonds, that would undermine trust in the currency," Shirakawa said. That could "invite increases in long-term interest rates or instability in the financial markets, making it more difficult to issue government bonds," he added.
Shirakawa indicated he wants the government to raise taxes instead if it is to boost spending.
"If people develop a view that there is little prospect of revenue coming in...to back increased budgetary expenditure, that could hurt the effectiveness of public fund injections (into private-sector banks) as well as expansionary fiscal policy," he said. This means "there is a risk that (increased outlays) would have the opposite effects" of those intended, he added.
