Asia Times: EDITORIAL: NASDAQ to the rescue



	June 18, 1999	atimes.com

Japan Economy

EDITORIAL: NASDAQ to the rescue

If the Japanese bond market is to be trusted, incipient economic recovery signaled by the much higher than expected 1.9 percent first quarter growth rate is for real: the market is well down since last week's growth rate announcement (yield on the 10-year bellwether bond is up by over 30 basis points), indicating concern that with recovery taking hold the Bank of Japan will soon abandon its zero interest rate policy and rates will rise overall.

In a Wednesday press conference BOJ governor Masaru Hayami sought to allay such fears. ''I'm not thinking at this stage of raising interest rates,'' he said. ''We will continue to supply markets with ample liquidity until worries about deflation have been wiped away.'' But markets apparently remain unconvinced.

Well, we're not in the business of second-guessing market judgement. It's as risky as it is unrewarding. But Hayami's reassurances are backed up by the BOJ's report on finance and economy, also released Wednesday. The key passage in it - that lackluster corporate earnings and restructuring efforts are having a negative impact on capital spending and the employment situation, and that under the circumstances ''a swift, sustainable recovery in private demand would be unlikely any time soon'' - accords with our own assessment. Massive deficit spending has had its impact, but Japan isn't out of the woods yet.

In this light, and while its good intentions are granted, the Obuchi government's measures announced last week to create 700,000 new jobs and to restore Japanese industrial competitiveness were a grave disappointment: a hodge-podge of more deficit spending for make-work jobs, an assortment of old-style MITI industrial policy guidance and a few lifelines thrown out to ailing corporations. A Nikkei editorial said the Competitiveness Council had been revealed to be simply ''a sort of industrial life-support commission."

True enough, and that won't do. What Japan needs is not 700,000 unproductive new jobs in government or the construction sector, but 7 million new productive jobs in sunrise industry ventures. And that will or will not be accomplished by Japanese entrepreneurs. The government should stay far away from the process and be of assistance only in removing regulatory barriers.

One most useful development, which will give new enterprises in the IT and other high-tech sectors the helping hand and opportunities to raise expansion capital that they need and deserve, is the NASDAQ-Japan plan announced Tuesday. NASDAQ, the American stock exchange favored for listing by high-tech firms and featuring such industry giants as Microsoft and Intel, announced with Japanese venture capital firm Softbank Corp. that the two are investing 600 million yen ($5 million) in a 50-50 joint venture that they hope to launch in the fourth quarter of 2000.

The new market will first make NASDAQ stocks available to Japanese investors and later will also pursue original listings of new Japanese firms.

Japan already has its own smaller-cap market, the JASDAQ, organized by the Japan Securities Dealers Association and modeled on the U.S. NASDAQ. But it has remained largely illiquid and has rightly been criticized for failing to provide fertile breeding ground for entrepreneurial and venture companies in the way NASDAQ has succeeded in doing in the U.S.

NASDAQ-Japan, we are convinced, will provide the right local competition for the existing Japanese markets, and the sooner it comes on line the better. All that'll be needed then to truly get things rolling is a lively market in junk bonds (nowadays politely called high-yield debt securities).

But, of course, ready access to capital is only one condition for success in new venture development; it won't do much good if there aren't entrepreneurs who create the companies to issue the securities the new markets are preparing to trade. Not a bad idea, then, for NASDAQ-Japan to get things started by offering investors, especially individuals, direct access to American high-tech stocks - of which there are plenty.

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©1999 Asia Times Online Co., Ltd.