World Economic News
Bank of Japan To Buy Securities, Including Junk Bonds
In an "unprecedented scheme" to increase liquidity, the Bank of Japan announced June 11 it will buy corporate securitiesincluding "junk" grade. Following a two-day monetary-policy board meeting, the BOJ revealed it will, for the first time ever, purchase asset-backed securities (ABS). Previously, the Central Bank has bought less risky government bonds. BOJ plans to buy from private banks up to 1 trillion yen ($8.5 billion) of securities, backed by loans or receivables of small companiesincluding securities that could have credit ratings as low as "BB," a "junk" rating. The purchases will start at the end of July. This "unprecedented scheme," the BOJ said in a statement, is a way of "encouraging the development of the ABS market."
IMF Lashes Out at Argentina for Postponing Home Foreclosures
The International Monetary Fund is punishing Argentina for violating "creditors' rights," as specified in the short-term agreement signed last January. Article 30 of that agreement, signed by Finance Minister Roberto Lavagna, stated that for the duration of the eight-month program, "no law or other legal instrument could be approved allowing an involuntary suspension of creditors' rights." The Argentine Congress recently passed a law postponing home foreclosures for 90 days, which the Fund considers a violation of the agreement, and wants the new government to grovel, and ask for a waiverforegivenessbefore a new round of negotiations can begin. Looting rights ueber alles!
In a June 10 meeting with Secretary of State Colin Powell in Buenos Aires, President Nestor Kirchner said Argentina desires a "long-term, global debt agreement," to include both private debt as well as debt to multilateral agencies. (See also IBERO-AMERICA DIGEST.) Kirchner said, "[W]e will pay, as long as it doesn't mean aggravating the country's social situation." The country requires an "in-depth solution" which would not leave a time bomb for the next government, Kirchner emphasized. There must be a write-down and rescheduling of private debt, and a viable, long-term agreement with international agencies, including a rescheduling of payments to the IMF.
Mahathir Urges Private-Sector Switch to Euro for Trade
Citing the probable continued devaluation of the U.S. dollar, Malaysian Prime Minister Dr. Mahathir bin Mohamad called on the private sector to dump the dollar in favor of the euro, for international trade, the New Straits Times reported June 8. He said there was no intention to review the ringgit's peg against the greenback, but that "the government felt there was a need for the private sector, especially those involved in exporting manufactured goods, to use the euro for payments since the U.S. dollar was likely to depreciate further." He had earlier called on the state oil company Petronas to explore the possibility of using the euro in its oil and gas trade.
Mahathir also said the government had expanded economic activities by opening new markets for Malaysia's exports, especially in South Africa, South America, the Arab countries, and the West Asian region. "This is to ensure that the nation was not overly dependent on traditional markets such as the U.S. and Europe."
China Begins Work on World's Longest Transoceanic Bridge
China began work June 8 on the 22-mile bridge across Hangzhou Bay, from Shanghai to Ningbo, the longest transoceanic bridge in the world. The $1.4-billion project, which is expect to be completed by 2009, is one piece of the planned 3,200-mile highway from Heilongjiang in the far north, to Hainan Island in the far south.
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