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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
APRS
BOARD OF GOVERNOR#
1962
F E D E R A L RESERVE SYSTEM
FEDERAL ?;isr.MVE B A N K
• OF RICHMOND
H. 13
No. 53
March 30, 1962
(CAPITAL MARKET DEVELOPMENTS ABROAD
Io Japan
H«, Nine Charts on Financial Markets Abroad
I. Japan; Money and Capital Markets in February
The money market continued to remain tight
to a large Treasury cash surplus common at this time
rates remained at about the same level as in January
interest rates continued to move up through January,
slower pace*
in February due primarily
of the year. Call loan
and the general level of
though at a somewhat
The balance of payments continued to improve as imports declined,
though the trade gap remained large» International reserves rose $U million
in February to $l>£llj. due to continued short-term borrowing abroad* In
February, Japan drew the last $50 million instalment of the $200 million
credit arranged with three American banks last November and also $13 million
of a $125 million credit arranged with seven American banks in January©
Money Market. Seasonally high net Treasury receipts kept money market
conditions relatively tight in February. Liquidity in the business and financial
community was reduced due to net Treasury receipts of ¥131 billion and a T7 billion increase in bank notes in circulation in FebruaryThis was only partly
offset by a *59 billion expansion in Bank of Japan loans and discounts, and
•
special purchase by the Bank of ¥70 billion in government-guaranteed securities
in order to counter the large Treasury surplus„ These securities are to be
repurchased in April,
Interest Rateso The average interest rate for bank loans and discounts
continued to rise through January 1962, but since last October the rate of increase
has slowed» From a low of 7<>88 per cent in June 1961, the rate rose steadily to
8.20 per cent in December and then moved up slightly to 8e21 per cent in January
This slower rate of increase apparently reflects a diminishing of the upward
pressures on interest rates brought on by last summer's credit tightening measures.
Average Monthly Interest Rates on
Bank Loans and Discounts
1960
1961
1959
8.18
March
8.21
7o92
8.08
June
8.22
7.88
8.00
September
8c06
8.1k
December
8.11
8.08
8.20
1/ January.
Bank Loans and Discounts. Continuing the trend that began in mid-1961,
bank credit in January rose less rapidly than a year earlier. Total holdings of •'V
loans, discounts and securities were up 0.U per cent in January compared to a
NOT FOR PUBLICATION
DECONTROLLED AFTER SIX MONTHS
-
2
-
0,7 per cent rise in January 1961. Irank lo;na alone, on the other
hand, rose at a higher rate than a year earlier, Deposits fell
3,1 per cent in January, following a seasonal high in December, compared to
a drop of 1.6 per cent in January of 1961, Details on bank deposits and
assets are provided in the table below.
Commercial Banks: Quarterly Changes in Deposits and Principal Assets
(In billions of yen)
MAIN
ASSETS
Per
Per
Per
Per
cent
cent
Bills
cent
cent
Deposits change Loans change Discounted change Securities change
1959 I
II
HI
IV
+201
3.1
- 22 . —0.3
+276
Uol
6.8
+U75
+1U3
+ 83
+136
+207
3.6
2o0
3.2
U.7
+ 21
+ 86
+1U9
+169
1.2
U.9
8,1
8.5
+
+
+
+
51
62
58
66
5.2
6.1
5.3
5.8
1960 I
n
III
IV
+2 h9
+ 96
+506
+607
3.U
1.3
6.5
7.3
+176
+167
+2UU
+3U7
3.8
3.5
U.9
6.7
+ 51
+ 87
+172
+185
2.5^
3.9
7.5
7.5
+ 78
+ 75
+ 35
+127
6,5
5.8
2.6
9.1
1961 I
Jan.
II
III
IV
+502
-lh.0
+169
+359
+U30
5.7
—106
1.8
3.8
U.3
+326
+ 68
+206
+216
+232
5.9
1.2
3.5
3.6
3.7
+ U8
- 23
+133
+206
+ 220
1.8
-0.9
U.9
7.3
7.2
+103
+ 26
+10U
+ U3
+122
6.8
1.7
6.U
2.5
6.9
1962 Jan.
-321
-3«1
+ 85
1.3
- 62
-1.9
+ 26
l.U
Deposits of the 13 large city banks rose in. February, but at a
much slower rate than a year earlier. Their loans also increased, but at
a somewhat slower pace than a year ago*
The proportion od^ bank loans and discounts extended for purchases
of equipment rose to 17o2 per cent in January, thus returning to the OctoberNovember 1961 level after a seasonal dip in December,
Bond Market. The volume of new monthly issues of bonds and debentures fell to ¥93 billion in January following a December high of ¥101 billion.
New monthly issues of industrial debentures continued their decline from the
March 1961 high of ¥89 billion and in January amounted to only ¥10 billion,
"The volume of new issues of other securities was also off in January, bank
debenture issues declining from ¥66 billion in December to ¥63 billion in
January and public corporate debentures dropping from ¥23 billion in
December to ¥21 billion in January,
Japan also successfully placed a $25 million (DM 100 million) bond
issue in the German capital market in February. (See Capital Market
Developments Abroad, March 2, 1962.)
NOT FOR PUBLICATION
NOT FOR PUBLICATION
3 -
Stock Market e Stocks eased
Joff f romraid-Februaryto mid-Hsrch
i&)of
following a 26 per cent advance from the December low® The Dow Jones
average declined from ¥1,590 on February lit to ¥l,h55 on March lU or by
9 per cent. During the last half of March stocks moved up slightly.
Dow Jones Average of 225 Stocks
Tokyo Stock Exchange"
January 31
February 7
Hi
21
28
? 1,511
1,553
March 7
. lit
20
28
1,1#
l,L9k
1,177
T 1,830
1961
High
Low
Y 1,258
1962
High
Low
T 1,590
? 1,1403.
1,503
On February 9 the Tokyo Shibaura Electric Company successfully
floated a $9*3 million issue of 600,000 ADR (American Depository Receipts)
shares in the New York market, the second successful issue of ADR shares
in the United States since June 1961 „
Foreign Trade and Capital Flows« The trade deficit, based on
seasonally adjusted customs data, continued to narrow in February reaching
$93 million compared with a peak of $223 million last October„ Exports in
February, also seasonally adjusted, rose to a new high, slightly above the
December level, and imports continued their downward trend from the
November 1961 high. Despite this improvement, however, the trade gap is
still too large to be covered by net invisible receipts» The monthly averages
of seasonally adjusted trade figures on a customs basis (in millions of
,
dollars) are detailed below„
Exports
Imports
Trade Balance
1960
Year
IV
337
353'
375
395
» 38
- U2
1961
Year
I
n
ni
IV
35U
3hk
351
359
360
L86
U20
U66
511
5U7
"132
- 76
-115
-152
-187
October
November
December
333
362
385
556
567
516
-223
-205-131
1962 January
February
352
388
L9lt .
U81
-11+2
-93
The current account deficit, as measured on an exchange transactions
basis, narrowed in February to $h9 million, about the same level as in
November and December last year* Imports were at lower levels than earlier
NOT FOR PUBLICATION
NOT FOR PUBLICATION
and exports recovered from a seasonal dip in January9 Long-term capital
receipts were $1*9 million and included $25 million in proceeds from a bond
issue in Germany and $9 million from an ADR issue of Tokyo Shibaura Electric
stock in New York. Long term capital outpayments at $50 million were also
Inrge due to retirement of the $39 million in British Sterling Bonds of
1905. Net short-term capital receipts at $1*7 million reflected the
additional borrowing from U6Se banks and the rise in Euro-dollar and free
yen deposits offset by_a^substantial reduction in short-term claims on
foreigners• The over-all balance of payments .showed a surplus in February
of $1* million including unexplained receipts of $6 million«
Total Japanese short-term liabilities to the United States as
reported by U.S* banks rose $66 million in January to a preliminary level of
$1,511 milliono (See table below0) Following a downtrend from July through
November, liabilities have now risen for a two month period<>
Short-term Claims on Japan
Reported by Banks in the United States
(In millions of U.S„ dollars)
Jan.
Feb.
Mar.
Apr,
May
June
' 168
175
201*
221*
21*2
260
1960
1961
^62
372
1*20
1*56
1*88
1*97
875
9#
1,069
1,159
1,196
1,272
1962
1,511 P
July
Aug.
Sept.
Octc
Nov*
Dec,
. P = preliminary,
1959
1960
1961
256
269
262
262
275
322*
586
628
660
693
711
806
l,3Ul
1,335
1,288
1,281
1,292
1,1*1*5 P
•
—
Foreign Exchange* The strengthening of the yen in the forward
market, which began last November, ended in mid-February<, From a discount
of 0.06 per cent per annum op February 15, the discount rose gradually to
0,28 per cent on March 15 o Indications that industrial activity may not
be slowing sufficiently to correct the balance of payments problem may
account in part for the recent weakening of the yen in the forward markete
The yen dollar spot rate continued to remain at the official support point,
unchanged since April 26, 1961«
NOT FOR PUBLICATION
NOT FOR PUBLICATION
- 5 -
Customer's T„ T» Exchange Rates
of Bank of Tokyo in Tokyo
Date
Yen-dollar
spot middle rate
Three«month
forward middle rate
Forward discount
in per cent per annum
January 26
361.10
361.20
.11
Februaiy 2
9
361.10
361.10
•11
23
361.10
361.20
361.20
361.20
361.20
361.10
361.10
361.10
361.20
361.35
361.35
16
March
2
9
15
361.10
.11
.11
.11
.11
.28
.28
Asia, Africa, and Latin America Section,
II. Nine Charts on Financial Markets Abroad
Chart
Chart
Chart
Chart
Chart
Chart
Chart
Chart
1 - Interest Arbitrage, United States/Canada
2 - Interest Arbitrage, New York/London
3 - Interest Arbitrage for German Commercial Banks
U - Interest Arbitrage, Frankfurt/London
5 - Short-term Interest Rates
6 L o n g - t e r m Bond Yields
7 - Industrial Stock Indices
8 - Spot Exchange Rates -<=- Major Currencies
Against U.S. Dollar
Chart 9 - 3-month Forward Exchange Rates
INTEREST ARBITRAGE, U N I T E D STATES / C A N A D A
JT h j j r t d o y
figures
1 T H R E E - M O N T H TREASURY BILL RATES
UNITED STATES
RATE DIFFERENTIAL W I T H F O R W A R D E X C H A N G E COVER
NET INCENTIVE IN FAVOR Of CANADA +
.1 1
INTEREST ARBITRAGE, NEW Y O R K / L O N D O N
Friday figures
3 - M O N T H TREASURY BILL RATES
RATE DIFFERENTIAL A N D
|
3 - M O N T H FO RWARD STERLING
RATE DIFFERENTIAL WITH
F O R W A R D E X C H A N G E COVER
INTEREST ARBITRAGE FOR G E R M A N C O M M E R C I A L B A N K S
Friday
t i g u r ot
1 3 - M O N T H TREASURY BILLS, I N T E R B A N K L E N D I N G RATE A N D
J EURO D O L L A R D E P O S I T RATES
6 E l MAN INTIRIANK LOAN RATE
EURO-DOUAR
RATE D I F F E R E N T I A L A N D F O R W A R D DEUTSCHE MARK
, 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 COVER
NET INCENTIVE:
. \ INTERBANK 10AH RATE
/ \
| Note:
Special forward rale
IN FAVOR OF FRANKFURT ( + )
V
SMTEREST A R B I T R A G E , F R A N K F U R T / L O N D O N
1 3 . M O N T H TREASURY BILLS A N D
I N T E R B A N K L E N D I N G RATES
i ....—r
1 — — | —
RATE DIFFERENTIAL A N D |
- 3 - M O N T H FORWARD STERLING
SPHAP IN FAVOR OF UNITED KINGDOM » I U
RATE DIFFERENTIAL W I T H FORWARD EXCHANGE COVER
N
,1960
S H O R T - T E R M INTEREST RATES *
1
E U B O - D O i m - lOMDON *|" L
j\
CANADA
3-month treasury bill rates lor all countries except Japan (3-month interbank deposit rale) and Switzerland (3-month depoiit rote) ."]
| { 3-month rat* lor U. 5. dollar deposits in London
\x
[Chon 6
L O N G - T E R M B O N D YIELDS
, *
GERMANY
V
\
2
1 i
1 i
1 ii
1 i i i 1i1 i1 i1 1 1 1 UULU
1 1 1 I 1 11 1l 1 1 1 1 1 11 11 11 11 1 1 1 i
j If 51
rch
°"-7.
..
I N D U S T R I A L STOCK I N D I C E S *
30 01
SWITZfllANB
i no j
too I
IjOOi
CANADA
r$oi
1160
|Not«:
Japan; Index of all Hacks traded on Tokyo exchange.
?
' ...
" S P O T EXCHANGE H A T E S - M A J O R
CURRENCIES A G A I N S T U.S. DOLLAR
//
3 - M O N T H F O R W A R D EXCHANGE RATES
A G A I N S T U. S. DOLLARS
' A G A I N S T P O U N D STERLING - L O N D O N
U.S. DOLLAR
A G A I N S T P O U N D STERL N G - L O N D O N
FIENCH f t A N C } i
W
@FedFRASER