-Reaserch Topics -12m $-CHF Forecast -Dow-Dollar Examined	Research: Long Term Loans in Majors

Fundamentals Japan is cornered with a stagnant economy and no room to maneuver on its Monetary and Fiscal Policy fronts As a result, both USA and Japan may be willing to let the Yen weaken Interest rates should continue to be relatively low

40-45% of Japan’s exports is to the Far East. The region has been facing slower growth (due to a fall in exports due to hitherto strong currencies), large trade deficits and now falling currencies. The malaise may continue for a while. This could dampen demand for Japanese goods. Even if the Tigers pick up again next year on the back of a weaker Dollar, a slower US economy would be bad for the rest of Japanese exports. Domestic demand is not growing at all, and seems to have been hit hard by the "Consumption Tax" in April 1997. Whatever recovery is happening (or is supposed to happen) is only export-led. And the export performance is limited to the large companies. Japan has no more room to maneuver on its Monetary Policy front, with the Official Discount Rate as low as 0.5% and the 10 JGB Yield falling to a record low of 1.958% on 1st September, 1997. Japan has also very little ammunition left on the Fiscal Policy front. As a result, the onus would be on weakening Yen to lift Japan out of its misery Whether that will make USA see red is the question the market is grappling with right now. There is a possibility that the "Real Yield" in Japan could fall further in 1998 and that the "Yield Gap" vis-a-vis the Dollar could widen. CHECK We could probably be looking at a weak/ very weak Nikkei.

Technicals

	There are even chances that the Yen will gain to 117 in the next 3 months or that it will weaken to 128. Both should prove to be formidable levels. We could see 140 over 24 months
	The key to the future movement of Dollar-Yen really lies in Mark-Yen. If Support at 63.80-65.20 holds on Mark-Yen, the Yen could weaken against the Dollar. DEMJPY could see 70 over the next 24 months.

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