• We are concerned about adverse movements in the value of the Yen.

Currency

• The Japanese Yen is widely expected to stay in a ¥115-125/US$ range.
• Few investors expect a sharp Yen sell-off to, say, ¥140-150/US$ or beyond.
• Government acceptance for a weaker Yen is likely to prove temporary.
• Some feel that a stronger Yen could emerge in the first quarter or two of the 2000 fiscal year (Starting March 1999).

Our View

• Our most likely expectation is that volatility will remain subdued and there is limited probability that the Yen will appreciate versus the US$.
• Reason: The pace of economic deterioration has clearly moderated - helped by the enormous fiscal stimulus and the bank restructuring package – but the bottom has probably not yet been reached. Most believe that the trough in activity is already close at hand although concerns are expressed that the impact of the fiscal stimulus package will diminish after the summer.