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D I V I S I O N OF I N T E R N A T I O N A L F I N A N C E
BOARD OF GOVERNORS
OF T H E
F E D E R A L RESERVE SYSTEM
Hl 13
.
No. 151
June 3, 1964.
CAPITAL MARKET DEVELOPMENTS ABROAD
I.
II,
I.
Japan
Nine Charts on Financial Markets Abroad
Japan:
Money and Capital Markets in April - May
There-are no reported Japanese capital market issues in Europe in May,
but several sizeable issues are scheduled for June. There was c.ve issue for $22,5
million in April (See Table 7). Japanese short- and long-term borrowings from
U.S. banks continued to rise in March and increased by $284 million during the
first quarter. Short-term borrowings alone rose by $227 million. (See Table 1)»
Table 1.
Japan;
Short- and Long-term Borrowings in the U.S.
Change during Year
Bank claims:
Bank claims:
Bank claims:
Change during Period
1963
1964
II III IV
Jan. Feb.
1960
1961
1962
1963
I
480
3
483
722
__5
727
212
51
263
397
169
566
11
2
13
118
35
153
30
58
141
200
51
84
60
5
0
0
_0
513
785
404
766
64
237
83
394
106
105
73
short-term 1/
long-term 1/
Total
Securities 2/
Total
- 7 287
30 102
23 389
Mar.
94a/ 59 a/
74
32 a/ 11a/ 14 a/
1C5
106
73
_1 / Liabilities to U.S. banks
2/ New security flotations."
_a / Preliminary
On April 1, Japan assumed Artile vIII status under the IMF' and made the
yen freely convertible for current international transactions. On the same day,
Japan also obtained a stand-by credit with the IMF for $305 million
Later in the
month on April 28, Japan became the first Asian member of the Organization tor
Economic Cooperation and Development.
Money market conditions tightened moderately in May and call Toan rates
increased slightly. Bank credit continued to expand in March at a slower rate than
a year earlier reflecting the authorities' tight money policy. The stock market
advanced 10 per cent from early April through the end of May. but then eased
slightly through June 1.
The seasonally adjusted trade deficit narrowed in March and April3 but
still remained relatively large. International reserves declined $45 million in
May bringing the loss since last October's high to $172 million. The yen remained
relatively weak in the spot foreign exchange market during most of April and the
first half of May.
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(Decontrolled after 6 months)
OFFICIAL USE ONLY
-
2
-
Money market. Money market conditions remained relatively easy in
April but tightened after the first week in May. The expansionary impact from net
treasury payments of ¥280 billion in April was only partly offset by the contractionary effect from a ¥231 billion reduction in Bank of Japan credit and an ¥18
billion increase in bank notes in circulation.
Interest rates. Call loan rates remained unchanged during April but
increased slightly on May 7, remaining at the new level through May 23. The rate
for unconditional (repayable at a day's notice) call loan money was 9.125 per cent
during April and the first part of May, but rose to 9.490 per cent on May 7 and
remained at that level through May 23. Over-night call loan money (for settlement
on the following day) changed by the same percentage amount at the same time during
this period. Over-month-end call loan money (repayable at a day's notice in the
following month) remained unchanged at 11.680 per cent during April and most of May.
The average interest rate for bank loans and discounts remained at 7.67
per cent in February, the same level as in January and December. (See Table 2).
Because of the current tight money policy inaugurated earlier this year, the rate
in the coming months is likely to register a mild rise.
Table 2.
Japan;
Average Monthly Interest Rate on Bank Loans and Discounts
March
June
September
December
1/
1959
1960
1961
1962
1963
8.18
8.28
8.06
8.11
8.21
8.22
8.14
8.08
7.92
7.88
8.00
8.20
8.22
8.23
8.24
8.09
7.92
7.75
7.68
7.67
February.
Bank loans and discounts. Bank credit rose 1.3 per cent in March compared to 2.9 per cent a year earlier. Loans and bills discounted increased 3.5
and 2.4 per cent over the previous month, respectively, while holdings of securities
declined 1.1 per cent. Deposits increased 6.1 per cent in March as business firms
window-dressed, compared to 8.4 per cent a year earlier.
For the first quarter, bank credit increased 2.5 per cent as against
6.8 per cent a year earlier. Thus in both March and the first quarter, bank
credit tended to rise at a slower rate than in the same periods in 1963. Details
are provided in Table 3 below.
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Table 3.
Japan:
-3-
Quarterly Changes in Deposits & Principal Assets of Commercial Banks
(in billions of yen)
Deposits
Per
Cent
Change
Loans
Per
Cent
Change
Discounted
Per
Cent
Change
Securities
Per
Cent
Change
1961
I
II
III
IV
+502
+169
+359
+430
5.7
1.8
3.8
4.3
+326
+206
+216
+232
5 ,9
3 »5
3 .6
3 .7
+ 48
+133
+206
+220
1.8
4,9
7.3
7.2
+103
+104
+ 43
+122
6 .8
6 .4
2 .5
6 .9
1962
I
II
III
IV
+128
+ 61
+678
+920
1.2
0.6
6.4
8.2
+256
+181
. +223
+585
3 .9
2,.7
3,.2
8.,2
+ 14
+108
+213
+145
0.4
3.3
6.3
4.0
- 64
+258
+ 41
+ 71
- 3,
A
• 14.1
21,0
3,.3
1963
I +1,158
II
+405
III +1,019
IV
+947
8.8
3.1
7.4
6.4
+717
+365
, +524
+589
9.,3
4. 3
5. 9
6, 3
+ 185
+ 150
+245
+293
4.9
3c8
6.0
6.8
+
+
+
+
2,9
+344
3 c5
+ 111
2.4
-26
1964
I
+459
27
73
14
41
1.,2
3.,3
0.6
1.8
-1.1
Early in April the Bank of Japan announced that the 13 large city banks
should limit their loan expansion to ¥228 billion during the second quarter of
this year. This is 12 per cent below the actual loan expansion of ¥259 billion of
these banks during the second quarter of 1963.
The proportion of bank loans and discounts extended for purchases of
equipment in March was 16.9 per cent, the same as in February, but higher than the
cyclical low of 16.3 per cent in March of 1963„
Bond market. New issues of domestic bonds rose sharply in March to one
of the highest levels in years due mainly to a substantial increase in issues of
public corporation bonds. Total new issues in March were ¥175 billion, up ¥38
billion over the February level. New issues of public corporation bonds were ¥65
billion in March compared to ¥36 billion in February, New issues of bank debentures
increased from ¥77 billion to ¥79 billion and new issues of industrial debentures
rose from ¥24 billion to ¥30 billion.
Average yields in March on local government securities, public corporation
bonds, and one-year bank debentures remained the same as in earlier months and in
1963 at 7.354, 7.053, and 6.224 per cent, respectively, Yields on long-term bank
debentures were slightly higher in March at 7,285 per cent and yields on industrial
debentures rose from 7.477 in February to 7.498 per cent in March.
Stock market. After reaching^!ow for the year on April 9 of ¥ 1,203,
the stock average rose gradually througtvMay 28 when it reached a high for the
month of ¥1,322. This represented a 10 per cent advance, and appears to reflect
reports of higher corporate profits, a moderate improvement in the trade deficit,
and stock purchases by the Joint Japan Securities Company,
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OFFICIAL USE ONLY
Table 4.
- 4 -
Dow Jones Average of 225 Stocks, First Section of Tokyo Exchange
March
30
¥1,215
May
April
6
13
20
27
1,211
1,217
1,222
1,217
4
11
18
25
¥1,246
1,268
1,304
1,318
June
1
1,319
1963
High
Low
¥1,634
¥1,201
1964
High
Low
¥1,338
¥1,203
The Joint Japan Securities Company, consisting of 14 banks and Japan's
four largest securities companies, doubled its capital from ¥5 to ¥10 billion on
April 3. The firm was originally established on January 20, 1964, with a capital
of ¥2.5 billion and it also has access to ¥20 billion in bank credits. Part of
the recent buoyancy in the stock market has been attributed to the ¥15 billion in
stock purchases the company made during the January-April period this year.
Foreign trade. The seasonally adjusted trade deficit was substantially
lower in April than in January-February, but at an annual rate of $1.5 billion, it
was still relatively large for Japan. Exports rose 6 per cent in April but imports
were up 7 per cent, and the trade gap widened from $117 million in March to $126
million in April. (See Table 5). Thie trade figures (monthly, or monthly averages
on a customs basis) in Table 5 are based on seasonal adjustment factors computed
by the Board of Governors of the Federal Reserve System.
Table 5.
I
Imports
Exports
Balance
1962
II III
IV
Seasonally Adjusted Foreign Trade
(in millions of dollars)
.
I .
464
419
488
415
-116 - 60 - 24 - 99
- 73
494
378
468
408
Japan;
452
428
II
1963
III
IV
545
442
582
462
643
489
-103 -120 -154
Jan.
1964
Feb.
Mar.
Apr.
659
479
689
445
659
486
628
511
669
543
-180
-244
-173
-117
-126
I
Foreign reserves and capital flows. International reserves fell $45 million in May to a level of $1,930 million. Except for a $15 million gain in March,
reserves have been declining since last October and at the end of May were down
$172 million from the October peak.
.
The balance-of-payments current account deficit, as measured on an exchange transactions basis, narrowed in April to $76 million for the fourth consecutive month. The current account deficit in March was $99 million. Net long-term
capital receipts were $35 million in April as against $39 million a month earlier,
and net short-term capital receipts were.$74 million compared to $80 million in
March. Since reserves fell $21 million in April, while recorded net receipts
totaled $23 million, errors and omissions totaled a relatively large $54 million.
According to preliminary data, Japanese short-term liabilities to U.S.
banks, increased $59 million in March. During the five-month period NovemberMarch, Japanese liabilities increased $500 million. (See Table 6).
,
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!
OFFICIAL USE ONLY
Table 6.
1959
1960
1961
1962
1963
1964
NOTE:
Short-term Claims by U.S. Banks on Japan
(in millions of U„S. dollars)
1,292
1,896
1,793
2,376-
2,223
1,528
1,876
Data for 1962 and 1963 have been revised and include $52 million reported by banks
initially as of December 31, 1961.
So far as is known, there were no Japanese long-term issues in Europe in May,
although several offerings are planned for June. In mid-April„ the city of Tokyo
floated a $22.5 million bond issue in Europe. An American underwriting firm participated in this issue and it has been listed on the New York Stock Exchange. The
issue, however, is not registered with the U.S. Securities and Exchange Commission,
and it will not be sold in the U.S. By this device, American underwriters still
participate in the flotation of foreign dollar bond issues , and they -hope that
this will help to keep the door open for direct issues in the U.S. once Congress
has completed action on the interest equalization tax. On April 22, Japan obtained
a $50 million loan from the World Bank to finance part of a toll express highway
between Toyokawa and Komai.
'
Table 7.
Japan:
Long-Term Borrowings in Europe Reported in Financial Press
Capital
' Markets
Amount
Month
Floated
Bank of Japan
$ 7.0 m.
Jan. .1962
Two 5-year credits from 3
Swiss banks at 5-1/2-5-3/4
per cent in Sw francs,
Osaka City and
Prefecture
$25.0 m.
Feb. 1962
6-1/2%, DM bond issue
Osaka City and
Prefecture
$25.0 m.
March 1963
6-1/2%, DM bond issue„
Germany
h 5 mill.
($14.5 m.)
Aug. 1963
6%, U.S. dollar, 20-25 yrs.,
conversion of 1899 bond issue.
U.K.
Takeda Chemical Co.
$15.0 m.
Dec. 1963
6%. U.S. dollar, 20 yr„ convertible debentures„
Luxembourg
Canon Camera Co.
$ 5.0 m.
Dec. 1963
6-1/4%, U.S. dollar, 15 yr.
convertible debentures.
U.K.
Borrower
Gov't, of Japan
Terms
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Switz.
. Germany
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Table 7 (con't.)
-
6
-
Capital
Markets
Amount
Month
Floated
Osaka City and
Prefecture
$25.0 m.
Jan. 1964
6-1/2%, DM, 15 yr. bond issue.
Germany
Gov't, of Japan
$11.5 m.
Feb. 1964
5.5%, Sw Francs, 10-15 yrs.
Switz.
Teijin Ltd.
$10.0 m.
Mar. 1964
6-1/4%, U.S. dollar, 20 yr.
convertible debentures.
Luxembourg
C. Itoh & Co.
$10.0 m.
Mar. 1964
6-1/4%, U.S. dollar, 20 yr.
convertible debentures.
London
Taisho Marine and
Fire Ins. Co.
$ 4.4 m.
Mar. 1964
Equity issue (London Depositary Receipts), 20 mil. shares
at $0.22 per share.
London
Metropolis of Tokyo
$22.5 m.
Apr. 1964
5-3/4%, U.S. dollar, 15 yr.
guaranteed dollar bonds.
Europe
Borrower
_a/ Although this list is believed to be complete, some issues may have been omitted.
On June 9, Japan will place a 200 million DM ($50 million), 6 per cent
bond issue in Germany. The bonds will be offered at 99 per cent, with repayments
made after five years in ten equal yearly instalments.
Foreign exchange. The yen weakened in the spot market during the first
week of April and then continued to remain relatively weak through mid-May. The
rate in the three-month forward market, however, fluctuated within a narrow range
during April and the first half of May. Because of the weakening in the spot
market, the forward discount tended to narrow from"0.83 per cent on April 1 to
0.17 per cent on April 9 and continued to remain relatively small through midMay. (See Table 8 below).
• Table 8.
Japan:
Customer's T.T. Exchange Rate of Bank of Tokyo, in Tokyo
Yen-dollar
Spot Middle
rate
Three-month
forward middle
rate
Forward discount
in per cent
per annum
March
27
'361.00
362.45
1.61
April
3
10
17
24
362.00
362.30
362.30
362.25
362.45
362.45
362.43
362.43
.50
.17
.14
.20
May
1
8
15
362.30
— ^ 362.30
362.35
362.43
362.40
362.40
.14
.11
.06
Asia, Africa and Latin America Section.
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I N T E R N A T I O N A L M O N E Y M A R K E T Y I E L D S FOR U . S . D O U A R
INVESTORS
3 - M O N T H EURO D O L L A R D E P O S I T V S , C E R T I F I C A T E OF DEPOSIT^
W a d m i d a y I ig uret
'_P » '
YIELDS
N E W YORK OFFER RATES O N SELECTED 3 - M O N T H I N V E S T M E N T S
Frldei Hgerii
TREASURY BILLS- F u l l y H e d g e d
COMMERCIAL PAPER-Fully H e d g e d
[CANADIAN FINANCI COMPANY
, INTEREST A R B I T R A G E , U N I T E D STATES /
CANADA
3 - M O N T H TREASURY BILL RATES
RATE DIFFERENTIAL A N D F O R W A R D C A N A D I A N DOLLAR
SPREAD I N FAVOR O f CANADA +
.
i
r:
1
a
_i_. n ~ — i —
i
J
_i.. J
RATE DIFFERENTIAL W I T H F O R W A R D E X C H A N G E COVER
NET INCENTIVE I N F A V O R 0 F ~ C A N A D A
II
II
II
II
+
II
I I
I I
II
I I
II
INTEREST AHEITRACE, N E W Y O R K / L O N D O N
Friday tipi
3 - M O N T H TREASURY B i l l RATES
ti.l. 10CAI AUTHORITY DEPOSITS
NEW YORK
RATE D I F F E R E N T I A L A N D
3 - M O N T H FORWARD STERLING
" SPREAD I N FAVOR OF LONDON
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
1963
INTEREST
ARBITRAGE
FOR
GERMAN
COMMERCIAL
BANKS
Per cent
r
3-MONTH
TREASURY
EURO-DOLLAR
i
i
f
INTERBANK
BILLS,
DEPOSIT
"
RATES
i
*
LENDING
RATE
r
AND
i
GERMAN I N T E R B A N K
LOAN RATE
E U R O - D O l l A R LONDON
j
GERMAN TREASURY BILLS
I
RATE
I
I
DIFFERENTIAL AND
I
FORWARD
DEUTSCHE
MARK
SPREAD I N FAVOR OF FRANKFURT:
FORWARD RATE DISCOUNT l - l
INTERBANK LOAN RATE
!
IVl
f
TREASURY
URY BILLS
.1 L i J
RATE
DIFFERENTIAL
WITH
NET INCENTIVE
FORWARD
L
i
i
1
EXCHANGE
IN FAVOR OF FRANKFURT ( + )
INTERBANK LOAN RATE
!TREASURY BILLS
i
V f
X/i
COVER
i
i
j
~
.i
i
.
per
onn
Chart 5
SHORT-TERM
INTEREST
RATES *
E U R O - D O H A R - LONDON
| and Switzerland {3 monih depotil rate)
3 month rote I or U 5. dollar depoitli m London
L O N G - T E R M B O N D YIELDS
V
I N D U S T R I A L STOCK INDICES
SWITZERLAND
S P O T E X C H A N G E RATES - M A J O R C U R R E N C I E S A G A I N S T U . S . D O L L A R
Above p o
FRENCH FRANC
3-MONTH
FORWARD
E X C H A N G E RATE
F r i doy figures
AGAINST
AGAINST
U.S. DOLLARS
POUND
STERLING : L O N D O N
PREMIUM +•
AGAINST
POUND
STERLING - L O N D O N
PREMIUM +
@FedFRASER