Tags: Japan | US | debt | deadline

Japan Increasingly Alarmed US May Miss Debt Deadline

Sunday, 31 Jul 2011 06:43 AM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink

TOKYO — Japan is increasingly alarmed that the United States may miss the Aug. 2 deadline for raising its debt ceiling and Tokyo fears markets may be too optimistic about prospects of a lasting solution to the crisis, sources familiar with Japan's international and monetary affairs said.

Officials still hope Washington can manage to strike a last-minute deal and even if that proves impossible, will give priority to interest payments to international holders of U.S. Treasury debt to limit the immediate market impact, the sources said.

But Tokyo's concern is that, if the crisis drags on without clear and sustainable resolution, markets may be thrown into turmoil, just like it happened when Lehman Brothers collapsed in September 2008.

"There is nothing really concrete that supports the still predominant view that the U.S. will somehow clinch a deal in time and avoid default," said one of the sources.

"If there is a default, the impact on global markets will be huge."

Another source confirmed this view. "Nobody thought Washington would let Lehman collapse. But look what happened," the official, who declined to be named because of the sensitivity of the matter, said on Sunday.

Japan ranks only behind China on the list of United States' biggest international creditors. If markets go wild over a threat of U.S. debt default, Japan's first defence will be to ensure that Japanese financial institutions have sufficient supply of dollars, the sources indicated.

The Bank of Japan believes Japanese commercial banks have sufficient dollar cushion but will use its dollar swap arrangement with other central banks to prevent a dollar squeeze in case of market turmoil.

It is also prepared to flood markets with cash through its market operations in case inter-bank borrowing costs spike, BOJ officials say.

Another source of concern is the yen's ascent near a record high of 76.25 to the dollar hit days after the March quake.

Japanese monetary authorities are prepared to step into the currency market to stem yen rises if they see the moves as driven by speculators and damaging enough to the economy.

The BOJ may also consider easing monetary policy at its two-day rate review that ends on Friday, or even earlier, if the yen continues to spike enough to hurt business sentiment and derail a fragile economic recovery.

© 2014 Thomson/Reuters. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
You May Also Like

In Gaza Lull, Residents Return to Destroyed Areas

Saturday, 26 Jul 2014 07:10 AM

Thousands of Gaza residents who had fled Israel-Hamas fighting streamed back to devastated border areas during a lull Sa . . .

Immigrant Children Landing in Every State - Texas Has Most

Friday, 25 Jul 2014 20:45 PM

More than 30,000 children who've poured over the U.S.-Mexico border as part of an unprecedented flood of migrants have b . . .

Reps. Fleming, Sessions Spar Over House GOP Border Plan

Friday, 25 Jul 2014 20:27 PM

A proposal by House Republicans to slash President Barack Obama's emergency aid request to address the illegal immigrant . . .

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved