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DIVISION OF INTERNATIONAL FINANCE H . 13 February 285 V BOARD OF 8 OV ERNORI 8, 1967. ^CAPITAL MARKEIIDEVELOPMENTS ABROAD I. II, Japan Nine Charts III. I. 1„ J a n u a r y 25 and reaction the $ 1 0 0 m i l l i o n it h a s bonds, Because of to the in the 13 C h a r t in D e c e m b e r - J a n u a r y in the U„ S. in J a p a n . The to w h i c h to administration on Japanese 123 point drop w h e n exemption no plans Series Interest Equalization Tax was B e c a u s e of r e l a t i v e l y h i g h U. at p r e s e n t ment guaranteed Markets Abroad in H, a n n o u n c e m e n t by "the U„ a doubling in c o n t r a s t earlier. Plotted and Capital. M a r k e t s Ihe seek a relatively mild not utilized program it w o u l d 15 p o i n t s four years Money Introduction. greeted with fell o n l y Japan: that on F i n a n c i a l Latest Figures S. the stock average IET w a s announced interest rates, Japan has it is e n t i t l e d u n d e r issue Japanese t h e U. S. g o v e r n m e n t , or g o v e r n - S. the r e c e n t e a s i n g in s h o r t - t e r m m o n e y r a t e s in the U. S . , the J a p a n e s e m a y r e s u m e s o m e o f t h e i r s h o r t - t e r m b o r r o w i n g h e r e , S i n c e the h i g h s c f 1 9 6 5 , the o u t s t a n d i n g l e v e l o f J a p a n e s e b o r r o w i n g in the U„ S. h a s d e c l i n e d about $635 million. Table The 1. latest Japan: trends Short- are indicated nd L o n g - t e r m B o r r o w i n g (in m i l l i o n s Change during 1962 1963 1 below. in the U. S. of d o l l a r s ) year 1964 in T a b l e Change during 1965 1965 period 1966 Short-term claims!/ 212 431 4 8 2 - 59 -125 - 4 16 - 49 -248 - 51 - 87^ - Long-term claims H TOTAL _50 262 L28 559 136 15 618 - 44 ^ 8 -133 - 26 - 30 - 11 5 - 28 - 77 - 32 -280 - 19 - 70 - 19^ -106&1 - Security flotations TOTAL 141 403 200 759 0 618 20 -113 20 - 10 0 5 0 - 77 0 -280 _0 - 70 0 0 . -1062/ - 25^' 1/ j)/ U. S. c l a i m s o n J a p a n as r e p o r t e d 63 19 b y U„ S. b a n k s „ Preliminary. NOTE: See Tables changes claims and 7 and 8 for indicated in 1 9 6 3 , adjustments here „ and Newly $47 million to the reported and f i g u r e s on c l a i m s data added $45 million 1964, respectively, OFFICIAL USE ONLY (Decontrolled that might $150 million after 6 m o n t h s ) affect the to s h o r t - t e r m to l o n g - t e r m c l a i m s in 1 9 6 3 9%/ OFFICIAL USE ONLY International reserves tended to h o v e r above the 5 2 b i l l i o n m a r k dv.ring 1 9 6 6 , a l t h o u g h t h e r e w a s an o v e r a l l d e c l i n e of $ 3 3 m i l l i o n , f r o m $ 2 , 1 0 7 to $ 2 , 0 7 4 m i l l i o n . In J a n u a r y , r e s e r v e s f e l l $ 2 2 m i l l i o n to $ 2 , 0 5 2 m i l l i o n . The seasonally rose faster adjusted trade than exports. erally weak despite January. On a moderate the d o m e s t i c s l i g h t l y as g o v e r n m e n t a l of Japan authorized November bank and and tax r e c e i p t s . low for was regained ber as for remained high, in o n e of the c a l l at a s l i g h t l y issue prices declined 5, faster 2. and the tended rate Money market. expanded Bank notes factors 3o i to t i g h t e n than a year the Bank Through earlier, the ¥ 7 0 b i l l i o n because of in the r i s i n g v o l u m e in D e c e m b e r - J a n u a r y Money market conditions in b a n k B a n k of after reaching the A p r i l - D e c e m b e r loss notes tightened in D e c e m - totaled is less t h a n com- net payments by the in D e c e m b e r , b u t e x p a n - o n l y ¥ 4 8 9 b i l l i o n , as n e t B a n k of J a p a n c r e d i t r o s e as a r e s u l t o f trend, which slightly in c i r c u l a t i o n w a s J a p a n c r e d i t and h e a v y in c i r c u l a t i o n r o s e ¥ 5 0 4 b i l l i o n I n t e r e s t rates. months, mainly this gen- The bond market remained c a n c e l e d h a l f of A b o u t o n e - h a l f of imports f i r s t w e e k of in J a n u a r y Late ¥ 3 1 7 b i l l i o n and T r e a s u r y m a d e n e t p a y m e n t s o f ¥ 1 7 2 b i l l i o n . u p w a r d p r e s s u r e s on s h o r t - t e r m m o n e y r a t e s c o n t i n u e d „ I as loan money rates. slightly. this M a r c h improved on December the c o n t r a c t i o n a r y r i s e Treasury. in D e c e m b e r quarter the y e n r e m a i n e d by early February, p l e t e l y o f f s e t by sionary receipts the G o v e r n m e n t Stock the y e a r third side, money market conditions net lending rate scheduled in the foreign exchange market strengthening increase credit expanded national bonds of an the a v e r a g e b a n k generally buoyant a balance worsened In the likely Money market increased to c o n t i n u e conditions have Treasury receipts. in F e b r u a r y In J a n u a r y , tightened in r e c e n t In r e c o g n i t i o n o f and M a r c h , the B a n k o f J a p a n on J a n u a r y 25 a p p r o v e d an i m m e d i a t e i n c r e a s e in the m a x i m u m c a l l l o a n r a t e for o v e r - m o n t h - e n d m o n e y - - the r a t e for c a l l m o n e y r e p a y a b l e at a d a y ' s n o t i c e in the following month„ T h e r a t e r o s e f r o m 6 . 5 7 0 to 6 753 p e r c e n t on J a n u a r y 2 5 , f i r s t c h a n g e in the r a t e s s i n c e O c t o b e r 1 9 6 5 (Se-. T a b l e 2 ) i Table 2. Japan; Average Call Loan Money Rates ! (in per Overnighti./ 1966 1967 For per in T o k y o annum) Unconditional—^ O v e r - m o n t h - end—' November 5.475 5.840 December 5.475 5,840 6.570 January 5,475 5.475 5 840 5 840 6.570 5.475 5 .480 6.570 5.840 6:753 5.475 I] cent settlement on the following _2/ Repayable at a day's notice, 3/ Repayable at a d a y ' s notice in day. the following month. OFFICIAL USE ONLY the 6.570 6.570 OFFICIAL USE ONLY This change may possibly discourage purchases extent, because commercial some found it a d v a n t a g e o u s (6.57 per c e n t p l u s than per cent the y i e l d 4» expanding to b o r r o w call bonds yielding 6.795 be 6 . 9 3 5 per loans credit rose earlier. 1.8 per Loans other With invest the J a n u a r y call bonds to institutions have call money f e e ) and cent plus of n a t i o n a l financial over-month-end cent. on national at a s l i g h t l y and loan dealers' ( 6 . 7 5 2 5 per Bank banks at 6 . 7 5 2 5 these 25 c h a n g e . loan dealers' per c e n t funds in n a t i o n a l the c o s t w i l l fee) which now is h i g h e r bonds, and discounts. faster rate In r e c e n t m o n t h s b a n k c r e d i t h a s than a year c e n t , or s l i g h t l y m o r e and h o l d i n g s of earlier. than securities the 1.6 increased been In N o v e m b e r , b a n k per cent rate 1 , 2 and 3 . 8 per a year cent, respec- t i v e l y , as a g a i n s t a r i s e of 2 . 1 and 3.9 p e r c e n t a y e a r e a r l i e r . Discounted b i l l s w e r e up 1.7 per c e n t in c o n t r a s t w i t h a d e c l i n e of 1 . 1 per c e n t in N o v e m ber of cent 1965. rate Deposits a year Late flexibility there in J a n u a r y in e a s i n g is n o t too m u c h the B a n k a u t h o r i z e d and also extend bond rose 2,7 increased or purchases danger its loan to o f f s e t B a n k of the new Japan limits on in to limits credit was the the 2 . 4 per for Japan: in expansion to i n c r e a s e assumption in the n e a r heavily (See T a b l e 3), the Changes third future, that it c a n governing agreements have been broadened and both bonds. not released to from a sharp rise the third and a substantial in B a n k o f J a p a n L o a n s (in b i l l i o n s rise and H o l d i n g s in fourth expansionary, mainly because and the in D e c e m b e r , p r i m a r i l y resulting During government- long-term national expansionary quarter its that its o p e n m a r k e t o p e r a t i o n s , city banks were of l a s t y e a r B a n k of J a p a n c r e d i t w a s heavy security purchases in the f o u r t h q u a r t e r . the previously permitted corporations the p r e s s u r e o n b a n k r e s e r v e s in c i r c u l a t i o n . steps On the v o l u m e of c r e d i t no r e p u r c h a s e in a d d i t i o n on in o r d e r 3. than s p e c i f i c a l l y , B a n k of J a p W n r e g u l a t i o n s public figures Table faster took several credit conditions, of e x c e s s i v e b u s i n e s s of s p e c i a l Specific public. quarters B a n k of J a p a n self-imposed More debentures, bonds bank notes the tightening from city banks with to i n c l u d e b a n k c e n t , or m o d e r a t e l y the "use of b a n k d e b e n t u r e s to c i t y b a n k s . guaranteed per earlier. in of loans of Securities of y e n ) (3.) Period (1) L o a n s ; I n c r e a s e (+) ' • -v..- • f-j __ (2) N e t p u r c h a s e s (+) or s a l e s ( - ) of s e c u r i t i e s (l)+(2) N e t i n c r e a s e (+) or d e c r e a s e ( - ) 1965 I Quarter +216.5 + 1.0 +217.5 II Quarter - 14.4 -109.6 -124.0 III Quarter +133.1 - 43.3 +89.8 -182.0 -311.8 -129.8 IV Quarter OFFICIAL USE O N L Y OFFICIAL USE ONLY Table 3 -4- (cont.) (3) Net L o a n s : I n c r e a s e (+) or d e c r e a s e ( - ) Period (1) + (2) increase (+) (2) (1) purchases sales Net ( + ) or or d e c r e a s e ( - ) of securities (-) 1966 - I Quarter II Quarter 3.2 III Quarter IV Q u a r t e r +276.0 +279.2 0.6 -29.3 + 17.1 +128.7 - 29.9 +188.4 +124.5 +171.3 - 4.2 October + 8.5 - 67.4 - November 4.5 +124.7 -129.7 +192.9 -134.2 +317.6 December The tinued average interest rate on commercial bank to d e c l i n e s l i g h t l y rate has thus declined 7.99 cent. per This which occurred for almost decline in t h e Effective through November when is s l i g h t l y 18-month period January lending their standard cuts have been undertaken long-term 5. Bond rates for market. accounted S e p t e m b e r , new public volume issues corporate were ¥37 billion. of issues The volume In O c t o b e r , and The it w a s sharp drop of 1959. corporations reduced the G o v e r n m e n t ' s from ¥207 general points. policy of issues generally to ¥ 2 7 1 b i l l i o n . corporate bonds billion. total categories new billion, up ¥9 corporate bond on 5 . 6 5 8 per New issues declined„ billion, up ¥8 billion short-term government 7.354, 7.053 relatively and Data of industrial new are not yet In issues of debentures the ifesues o f b a n k f r o m the p r e v i o u s m o n t h , and indus- a v a i l a b l e on the in N o v e m b e r . local government securities, public securities remained cent, respectively. v e r y s l i g h t l y to 7 . 4 9 1 p e r c e n t in N o v e m b e r . s h a r p l y in O c t o b e r . One-year bank debentures S e p t e m b e r to 6 . 0 2 2 in O c t o b e r and N o v e m b e r . from 7 . 2 8 6 per c e n t to 7 . 1 8 5 p e r c e n t d u r i n g new to ¥ 2 4 0 b i l l i o n as In N o v e m b e r , billion. issues issues of fell Most bank debentures. o f b a n k d e b e n t u r e s w e r e ¥ 1 5 3 b i l l i o n , and In N o v e m b e r , y i e l d s b o n d s , and cent. 1964 w h e n through November of n e w m o n t h l y b o n d increasing for by p u b l i c for a l l trial bonds were ¥ 4 2 of p u b l i c t h a n the 1958 of d i s c o u n t s conper long-term credits by 0.2 p e r c e n t a g e as p a r t of bonds totaled ¥81 debentures were ¥140 volume greater from June and 7.39 lending rates. rose during April-September, the r i s e w a s since December 1, t h r e e g o v e r n m e n t a l b a n k i n g These reducing two y e a r s loans it r e a c h e d 58.9 at Yields their on corporation 1964-65 levels industrial bonds of rose Bank debenture yields changed f e l l f r o m 6 . 2 2 4 p e r c e n t in Long-term bank debentures the s a m e p e r i o d . OFFICIAL USE ONLY dropped -5- OFFICIAL USE ONLY Due n o t be to the r i s i n g v o l u m e necessary .of ¥ 7 0 b i l l i o n for in n a t i o n a l accordingly reduced of national bonds billion, rather of c e n t r a l the G o v e r n m e n t the bonds issue issued to in M a r c h , to ¥ 3 5 than ¥ 7 3 0 billion and 1966 tax the p r e v i o u s l y This will (ends M a r c h as o r i g i n a l l y receipts, scheduled the M i n i s t r y billion. fiscal during government issue of F i n a n c e h a s bring 31, planned. it w i l l amount the 1967) total amount to ¥ 6 9 5 The Government has a l s o d e c i d e d to i s s u e ¥ 8 2 0 b i l l i o n in n a t i o n a l b o n d s d u r i n g f i s c a l 1 9 6 7 o n the s a m e t e r m s as d u r i n g the c u r r e n t f i s c a l y e a r , v i z . , 7 - y e a r s , p r i c e d at ¥ 9 8 . 6 0 per ¥ 1 0 0 of face v a l u e , w i t h 6. quarter Jones of Stock market. 1966, average hit ¥1,364. in Stock and o n D e c e m b e r year's high reached level a yield prices 5 a low 1. of 6 . 7 9 5 continued for represented This on A p r i l to s u b s c r i b e r s The April to e a s e d u r i n g the y e a r w a s a decline peak, per c e n t . of the reached when 14 per cent incidentally, was last the Dow- from the the h i g h e s t three years. During the r e s t of D e c e m b e r and the first half of J a n u a r y , the stock a v e r a g e r o s e and r e g a i n e d 37 per c e n t of t h e A p r i l - D e c e m b e r d e c l i n e . On J a n u a r y 26 the a v e r a g e d r o p p e d 15 y e n , p a r t l y in r e s p o n s e to the U. S. T r e a s u r y ' s proposal years to C o n g r e s s earlier to e x t e n d the a v e r a g e d and double dropped the 123 yen Interest Equalization Tax. following the IET. O n F e b r u a r y 6 the a v e r a g e w a s ¥ 1 ,482, c e n t a b o v e the J a n u a r y 11 low. Table 4. Japan Dow Jones Average of 2 2 5 January the a high 28 ¥1,392 4 ¥ 1 ,441 5 12 1,364 9 16 1 ,424 December 1,391 23 1 ;,443 19 26 1,394 1,450 30 1.,458 6 1.,482 7. 1966, Foreign Trade. imports rose even October and N o v e m b e r . quarter of Although 5). l a s t y e a r w e r e u p 2 3 per 5. Japan: Imports 732 685 Balance +47 694 693 + 1 figures _b/ Preliminary. High ¥1,589 Low ¥1,364 continued High ¥1,482 Low ¥1,410 to r i s e late account in A u g u s t , exports in the to the exports same period and are I 788 741 +47 II III IV 790 762 +28 829 806 +23 851%/ 867%/ on a c u s t o m s -16^/ basis. OFFICIAL USE ONLY Aug. 792 817 -25 Sept. 844 831 +13 in fourth in 1 9 6 5 , imports were down or M o n t h l y A v e r a g e s ^ / 1966 IV All 1967 Seasonally Adjusted Foreign Trade, Monthly III _a/ of 5 per trade in r e l a t i o n 1965 Exports and adjusted b u t i m p o r t s w e r e u p 25 per c e n t . In D e c e m b e r , b o t h from the p e a k s r e a c h e d in N o v e m b e r . Table 1966 exports a d e f i c i t on Seasonally cent the y e a r 1 ,442 Japanese faster, causing (See T a b l e for Four announcement S t o c k s , F i r s t S e c t i o n of T o k y o Exchange November February initial Oct. Nov. 822 853 872 915 -31 -43 Dec. 859^/ 833^/ +26 %/ OFFICIAL USE ONLY 8. Foreign reserves $30 million were in D e c e m b e r down moderately fell $22 m i l l i o n transactions in D e c e m b e r But balance overall omissions outflow item. due to For International the y e a r as During Japan: basis, there was surplus was account and Net balance account large minus on exports. of a errors and of Payments o n an E x c h a n g e T r a n s a c t i o n s II 1966 III 51 85 _44 7 -58 27 - Basis of d o l l a r s ) IV 173 56 - 117 I IV Oct. Nov. Dec. 117 __44 94 -50 - 47 124 145 - 47 98 73 44 177 - 29 -34 II III 167 - 43 - 151 54 80 -52 97 28 99 -57 42 224 long-term capital Net surplus from only $30 million because 1965 Trade balance large 6). Balance I Current rose January, reserves receipts a relatively (in m i l l i o n s Services reserves a whole, reserves a very the s e a s o n a l l y h i g h of p a y m e n t s on c a p i t a l (See T a b l e T a b l e 6. flows. to the extent- of $ 3 3 m i l l i o n . O n an e x c h a n g e the capital to $ 2 , 0 5 2 m i l l i o n . current account substantial and to $ 2 , 0 7 4 m i l l i o n . 5 -10 - 24 - 23 -45 -22 33 - 38 11 -44 - 80 - 18 _13 -18 -104 2. 18 16 -54 -103 - 41 -32 -40 -138 - 56 6 -11 - 4 - 4 6 32 + 17 -37 1 - 10 - receipts - 51 short-term capital receipts Net balance on capital account Errors & Overall - omissions balance - 10 Quarterly 6 data are mon thly rounding. Although of 46 averages. These data also differ the last year stantially less, with during fourth the surpluses than o n J a p a n as r e p o r t e d peak was in t h e the r e s u l t 2 Data may from 7). reached on current third, that to r e d u c e through November. (See T a b l e - 93 5 -48 - 54 those - 20 25 25 in the account were the n e t capital international earlier less : in the outflow was reserves 30 exactly b e c a u s e of n o t add table on _her than fourth also sub- rose moderately quarter. Japan continued the U. S. 29 -103 f o r e i g n t r a d e as t h e s e a r e o n an e x c h a n g e t r a n s a c t i o n s , c u s t o m s , b a s i s and a r e not s e a s o n a l l y a d j u s t e d . quarter - 42 of payments NOTE: 8 63 by U. Japan has S. now in m i d - 1 9 6 5 the v o l u m e According banks its fell $9 m i l l i o n reduced by of to p r e l i m i n a r y its short-term borrowing data, in N o v e m b e r short-term borrowing about $500 million. OFFICIAL USE ONLY in short-term claims to $ 2 , 3 8 9 m i l l i o n . in the U. S. since a OFFICIAL USE ONLY Table 7. Short-term Claims on Japan Reported (in m i l l i o n s 875 952 1,069 1,159 1,196 1,272 1,341 1,335 1,288 1,281 1,292 1,528%/ 1,778 1,751 1,775 1,876 1,762 1,898 1,758 1,872 1,765 1,877 1,767 1,798 1,711 1,890 1,710 1,904 1,662 2,017 1,740 2,171 1964 2,247 2,340 2,400 2,394 2,421 2,469 2,416 2,472 2,493 2,488 2,496 1965 1966 2,742 2,746 2,861 2,833 2,834 2,880 2,831 2,830 2,755 2,698 2,699 2,783 2,782 2,759 2,733 2,588 2,536 2,485 Preliminary. Includes newly of last year, also reduced its long-term claims $483 million 1965, in D e c e m b e r 1961 19 20 19 25 50 119 54 136 54 143 329 482 332 475 351 352 464 403 393 83 . a * 49 111 323 483 425 479 406 1963 74 74 31 76 295 454 441 472 434 1964 280 1965 455 1966 438 a/ Preliminary. hi Includes newly December The Japan fell in N o v e m b e r 319 479 430 reported 1963, and r a t i o of to g e n e r a l l y Due primarily cent 311 per totaling $1 m i l l i o n $45 million international lower to s e a s o n a l to 2 5 . 6 in D e c e m b e r claims 325 levels factors, cent in D e c e m b e r reserves to in O c t o b e r This the and Sept. 471 374 in M a y note and $16 of Nov. Dec. 23 25 24 62 146 69 170 269 Oct. 355^/ 74 249£/ 430^/ 462 339^/ 445 1963, $46 million i s s u e of November. further contrasts with 1965. and N o v e m - fell $19 in 1964. the r a t i o d e c l i n e d in D e c e m b e r . million by $ 1 4 4 million. Aug. 18 19 25 2,810^/ 2,768^ the r e c o r d h i g h July 19 28 19 24 Since June 18 1962 in O c t o b e r S. , dollars) Apr- Dec. 1961, $157 b y U. S. b a n k s o f U. Mar. Nov. 2,656 , 2,683 2,3982,389^ in D e c e m b e r these claims have been reduced May Oct. 1965. (See T a b l e 8 ) . (in m i l l i o n s Feb. Sept. l o n g - t e r m b o r r o w i n g , and to $ 3 3 9 m i l l i o n . of Aug. on Japan reported million, respectively, in M a y July totaling $52 million 1 9 6 4 and $ 1 7 m i l l i o n Japan has ber ^ data reported in D e c e m b e r June S. B a n k s 1,601 1,685 "1,697 1 , 6 9 1 a/ b/ May b y U. S. d o l l a r s ) Feb. 1961 Apr. o f U. Jan. 1962 1963 Mar. -7- OFFICIAL USE ONLY the B a n k o f (See T a b l e 9). from 30.5 per cent a r a t i o of 2 9 . 6 per O F F I C I A L USE O N L Y Table 9. Japan: R a t i o of R e s e r v e s International End of Period to B a n k N o t e s Bank Notes Reserves (billions -8- Reserves/ Issued of y e n ) (billions Bank Notes of yen) 1959 ¥520.9 ¥1,029.4 1960 1961 701.6 599.8 1.,234.1 1,480.1 (per cent) 50.6 56.9 1962 727.9 1,745.9 40.5 41.7 1963 1964 740.9 719.6 2,057.4 2,298.8 31.3 1965 785.5 2,563.8 29.6 2,200.5 2,251.1 34.1 33.7 2,280.4 2,312.9 33.3 2,227.5 33.9 32.0 36.0 1966 January 749.5 February 759.2 March April 759.2 755.3 754.6 May June 757.4 2,368.2 July 739.4 August 742.7 2,397.7 2,324.6 32.7 30.8 September 735.8 2,326.7 31.9 31.6 October November 726.8 2,370.4 2,409.2 30.5 2,913.5 25.6 735.9 746.6 December 30.7 W i t h the d e c l i n e in r e c e n t m o n t h s in the i n t e r e s t r a t e o n b a n k e r s ' a c c e p t a n c e s in the U. S . , J a p a n e s e i m p o r t e r s a r e a g a i n f i n d i n g it m o r e a d v a n t a g e o u s to f i n a n c e t h e i r i m p o r t s by m e a n s of U„ S . , r a t h e r t h a n d o m e s t i c , credits. O n e o f the m a i n r a t e s for U. S = d o l l a r i m p o r t a c c e p t a n c e b i l l s r o s e f r o m 7 . 3 7 5 p e r c e n t at the end of 1 9 6 5 to 8 . 2 5 per c e n t in O c t o b e r o f l a s t y e a r . Since November of 1966 there have been acceptance rate, bringing r e s u l t of four the r a t e d o w n these developments, successive cuts to 7 . 6 2 5 it a p p e a r s likely t e r m c a p i t a l f r o m J a p a n , w h i c h w a s so c o m m o n t i a l l y , or e v e n r e v e r s e d this y e a r „ In m i d - J a n u a r y planning 1967. to import Industrial domestic the demand production gold for g o l d is o n l y able during the currently to s u p p l y that the 9. Foreign exchange. strengthened moderately in of F i n a n c e announced runs about 20 tons about 13 to 14 tons. spot market As substan- that it is 1, annually, but These gold the r e c e n t and from ¥ 3 6 2 . 6 0 a short- fiscal year beginning April D u r i n g m o s t of D e c e m b e r the 19. of be r e d u c e d p u r c h a s e s w i l l h e l p m e e t i n d u s t r i a l n e e d s , and a l s o r e d u c e to s m u g g l i n g w h i c h h a d a r i s e n as a r e s u l t of the s h o r t a g e . yen January net o u t f l o w in 1 9 6 6 , m a y Japanese Ministry 10 t o n s of in the b a n k e r s ' per c e n t by stimulus early January to ¥ 3 6 2 . 3 5 the to t h e d o l l a r , b u t w e a k e n e d in the s e c o n d w e e k of J a n u a r y „ In the t h r e e - m o n t h f o r w a r d m a r k e t , the y e n s t r e n g t h e n e d v e r y s l i g h t l y in m i d - D e c e m b e r , b u t o t h e r w i s e OFFICIAL USE ONLY OFFICIAL USE ONLY remained weak. yen fell quickly Table As from 0.39 returned 10. a result of per in e a i ' y cent to a s l i g h t Japan: these premium two development.-, the p r e m i u m on December in B a n k of T o k y o ' s T . T . (yen Yen-dollar for C u s t o m e r s in T o k y o S. d o l l a r ) forward middle rate Forward premium in p e r c e n t per annum 362.60 362.60 362.28 .35 362.25 .39 31 362.50 362.25 .28 7 14 362.50 362.55 362.15 362.25 .33 21 362.55 362.20 .39 28 362.55 362.20 .39 .39 5 362.60 362.55 362.35 362.35 .28 12 19 362.45 362.30 26 .17 362.45 362.35 . 11 362.40 362.35 . 11 .06 14 362.50 362.45 .06 January Prepared Exchange Rate per U. 17 24 November December forward 7, b u t s e c o n d w e e k of J a n u a r y . Three-month spot middle rate October the to z e r o on J a n u a r y 362.45 362.35 by: R o b e r t F. Emery, A s i a , A f r i c a and L a t i n A m e r i c a S e c t i o n , D i v i s i o n of International Finance. OFFICIAL USE ONLY .22 NEW Y O R K , L O N D O N , M O N T R E A L ; YIELDS FOR U . S . D O L L A R I N V E S T O R S O N 3 - M O N T H F U N D S D O L L A R D E P O S I T RATES: N E W Y O R K - L O N D O N EURO D O L L A R D E P O S I T — U . S . C E R T I F I C A T E OF D E P O S I T | EURO D O L L A R O V E R I U . S . C E R T I F I C A T E OF D E P O S I T . | 1 A i i i I V i 1 1 1 IT 1 1 1 1 II II 1 f\ 1 1 1 F I N A N C E C O . PAPER RATES ( c o v e r e d ) : Q U O T E D I N N E W YORK U.K. HIRE PURCHASE CANADIAN FINANCE COMPANY U.S. FINANCE COMPANY Mar. luw. Sept. 1965 Dec. Mar. Jun. 1966 Sept. Dec. Mar. 19671 JUR. LONDON: EURO YIELDS FOR DOLLAR DEPOSIT U.S. DOLLAR INVESTORS ON 3-MONTH FUNDS RATES 180 DAY 90 DAY CALL] [HIRE PURCHASE AND LOCAL AUTHORITY D E P O S I T RATES ( c o v e r e d ) EURO-DOLLAR DEPOSIT HIRE PURCHASE FAVOR H I R E P U R C H A S E FAVOR E U R O - D O L L A R LOCAL AUTHORITY DEPOSIT E U R O D O L L A R DEPOSIT—J FAVOR LOCAL AUTHORITY DIFFERENTIAL FAVOR EURO-DOLLAR, 1964 1965 1966 \V I INTEREST A R B I T R A G E : F R A N K F U R T / L O N D O N , Z U R I C H / L O N D O N F R A NKFURT I N T ERBA N K L O A N RATE VS. LON D O N E U R 0_- D O L L A R R A T E ( C O V E R E D ) INTERBANK IN- T E R M S O F LOAN RATE DM EURO-DOLLAR i D I F F E R E NH I ' A l l A - . 1 RAU/QiR FRANKFURT / 1 w 1 1 ! 1 1 ZURICH DEPOSIT 1 RATE VS. 1 V 1 1 LONDON EURO 1 1 1 DOLLAR 1 1 I 1 1 1 1 1 1 1 FAVOR EURODOLLAR RATE ( C O V E R E D ) 1 l N TERMS OF SWISS F R A N C S E U R O - D O L L AR / - \ < v A ' V 1 1 FAVOR ZURICH ! Kv K/ l 1 - DEP O S I T R A T E v ^ D I F F E R E NI T I A L H V SWISS i i v ^ 1 1 i FAVOR ElUR0-D0LLAR 1 i 1 I 1 1 1 1 1 1 1 1 1 PRICE OF G O L D I N L O N D O N 35.3 i 1965 I l 35.0 l 1966 1967 INTEREST A R B I T R A G E , U N I T E D S T A T E S / C A N A D A 3 - M O N T H TREASURY BILL RA ES C A N . F I N . CO. (PAPER CANADA - • - ' U N I T E D STATES BILL RATE D I F F E R E N T I A L A N D F O R W A R 5 C A N A D I A N D O L L A R SPREAD F A V O R OF C A N A D A I I FORWARD RATE 3.MONTH C O V E R E D RATE D I F F E R E N T I A L S (NET I N C E N T I V E S ] PRIME FINANCE PAPER FAVOR U.S. FAVOR CANADA TREASURY BILLS FAVOR U.S. I I I I I I I 1 1963 VA Char, 5 INTEREST A R B I T R A G E , N E W Y O R K / L O N D O N 3 - M O N T H TREASURY BILL RATES U.K. LOCAL AUTHORITY DEPOSITS LONDON W NEW YORK RATE D I F F E R E N T I A L A N D 3-MONTH FORWARD STERLING S P R E A D I N F A V O R OF L O N D O N PREMIUM DISCOUNT FORWARD RATE RATE D I F F E R E N T I A L W I T H F O R W A R D E X C H A N G E C O V E R ( N E T I N C E N T I V E ) I N F A V O R OF L O N D O N I N F A V O R OF N E W Y O R K 1964 1965 1966 1967 p S H O R T - T E R M INTEREST R A T E S * U.K. E U R O D O L L A R - LONDON us. SWITZERLAND JAPAN GERMANY CANADA U.S. 1962 1963 1964 1965 * i 3 month treoiury failf ro«e* for g(( counlnei except Sop an r(Av er oge rote on bonk loon* ond dncounU1), ' $wit*erlond[(3-mon h depoiit roteTj on d Germany (interbank loan Role) "^'3-monlK rate for U S doHar deposits in London 1966 L O N G - T E R M B O N D YIELDS GERMANY EURO DOLLAR BONDS — U.S. NETHERLANDS CANADA U.S. SWITZERLAND 1962 1963 1964 •/Averoge of yields for four foreign government dollor bonds quoted in London 1965 1966 SPOT E X C H A N G E RATES - M A J O R CURRENCIES A G A I N S T U . S . D O L L A R SWISS FRANC 1.2 GERMAN MARK U.K. STERLING FRENCH F R A N C B E L G I A N FRANC, DUTCH GUILDER C A N A D I A N DOLLAR .s\ " I T A L I A N LIRA J A P A N E S E YEN M J 1965 s M J 1966 S D M 1957 J 3-MONTH AGAINST F O R W A R D E X C H A N G E RATES U.S. D O L L A R S — N E W YORK GERMAN MARK SWISS FRANC POUND STERLING DISCOUNT1 PREMIUM* T DUTCH GUILDER FRENCH FRANC CANADIAN DOLLAR DISCOUNTAGAINST POUND STERLING — L O N D O N PREMIUM* SWISS FRANC A-/. GERMAN MARK U.S. DOLLAR DISCOUMTM 1 S 1 1964 0 M J 1965 S D S M 1966 D I Chart 10 ] INDUSTRIAL STOCK INDICES ^ .958.00 300 250 SWITZERLAND GERMANY U.K. U.S. 150 100 300 JAPAN 200 CANADA 150 100 1963 * * 1964 Swin Bonk Cerporolion indviiriol Mock index Japan: inde* o* 223 induilrial and other iiocki li 1965 1966 J.0/ February H. 13 No. 28b Latest Figures Plotted In H. 13 Chart Series. 196 (all figures par cent par annum) Chart 1 (Wednesday, Feb. 1 Upper Panel Euro-* Deposit Lower Panel ) 18 Spread favor U.K. (Friday, _ F e b , 3 Finance co. papers U.S. Canada Hire*purchase paper, U.K. Chart 2 (TrWey, Feb. 3 ) 5. 23 ) . 38 +0. 60 (Friday, Treasury billes U.S. U.K. 90-day 180-day 12 30-d ay Forward pound Mat incentive (U.K. +) Buro-$ deposits*: Call Chart 3 (Friday, Feb. 3 Treasury bills: U.K. U.S. 5.64 U.S. certlf. of deposit 4.44 5.79 4.51 Interbank loan rate (German) '"an. Hire-purchese paper (Jan, 7, 24-31} 5: 90 Iuro-$ deposit (London) : . 80 Zurich 3-mo. deposit (D«t.l ripe, is Japan composit rata (Dates Nov° 30 5.50 27) Local-authority deposit Chart 3 Upper Panel (Periods 24-31 Interbank loan (mid-point) Euro-$ deposit (average) 1°"" (Detei Dec. 5.46 : 13 Zurich 3*so. deposit iE^i4Li2ia Friday, > Canadian finance paper fihsyuz t. 5 4 4c 3 8 German Fad. (Fri., .Jan/ 27 1 7. 33 35 „195 SwissCoofed. (Fri.. Jan.20 ) 4.23 ' -0,43 -0.3b : 7.39 U.K. War Loan (Thurs.^ b 2 ) J +0,07 Nat incentive (Caneds •) ) 4.41 - t i L Chart 4 (Friday, Feb, 3 Forward Canadian $. 4.38 U.S. Gov't. (Wed., Feb. LD Trsesury bills* Canada U.S. Spresd favor Canada % 6.12 Canadian Gov't. (Wad..Jan,25) 5.64 Netherlands Gov't perpetual 3% (Friday, • . ar - 2: ^ 5.80 *uro-$ bonds (Fri., Feb, 3 ) 60 3 4 For descriptions and sources of data, see special supplement to l.U 9 limber 239, March 16, 1966. 1967
@FedFRASER