Events related to the Crash

• Thailand's macroeconomic export-led recovery seems to be on track.
• While the IMF is satisfied with Indonesia's reform programs, the local financial markets are concerned about potential political instability from Wahid's replacement of key cabinet members over the Bank Bali scandal.
• Hideyuki Aizawa is Japan's fourth Financial Reconstruction Commission chief this year [2000]. Japan has also indicated that the problematic clause in the Nippon Credit Bank sale will stay -- leaving Japan open to further coercion into contract violations.
• A power line collapse within Kenya caused severe disruption to the national electric grid from 2 AM to 4AM this morning. Meanwhile, opposition politicians are now openly criticizing the government for concentrating all of the hydroelectric power plants along the Tanu river. Apparently, there are several candidate locations in Western Kenya for more power plants.

• Kimitaka Kuze has become politically untenable for the position of Financial Reconstruction Commission chief, due to a scandal that was not a problem a month ago. The president of condominium company Daikyo Inc., , paid Kuze ¥100 million to fund LDP party membership fees in 1991 for approximately 33,000 new LDP members. This was compounded by income reporting anomalies through 1996.

• Japan has decided to put off the sale of Nippon Credit Bank to the Softbank consortium until Sept. 1, 2000, in an attempt to gain increased public acceptance of the debt buyback clause.
• The All Pakistan Organisation of Small Traders and Cottage Industries called another three-day strike, to start today, to defy Musharraf's tax net plans. The strike took hold in Lahore [capital of the populous Punjab province], but failed to get compliance in Karachi or Islamabad.

• The IMF announced that Russia's macroeconomic growth rate and reserve levels are increasing faster than expected, and that it looks like the IMF economic review for Russia could be held in September. The IMF also directly stated that the latest Swiss allegations about Russia's misuse of IMF funds "doesn't seem to hold together", since they seemed to be a combination of allegations that had already been proven false, and allegations whose amounts and timing were not traceable to any IMF funds.
• Apparently, there is a clause in the contract between Japan, and the investment group behind Shinsei Bank, that requires the Japanese government to buy back any loans that fall by 20% in value within three years. The Sogo Co. Ltd. bailout plan was required by this contract -- and the political upheaval that forced the collapse of this buyout forced Japan to renege on its own contract. The impending buyout of Nippon Credit Bank by the Softbank consortium has the same escape clause...which is now known to be political poison. Japan is trying to figure out how to get rid of the clause without annihilating the buyout. This is difficult, since the Softbank consortium considers the final contract to be sealed, making any change a violation of the contract....

• The bankruptcy of Sogo Co. Ltd. has raised the Tokyo Interbank Offered Rate [TIBOR] by six or seven basis points. This is attributed to fears that a mass collapse of Japanese construction firms is possible, which would render many Japanese banks insolvent.
• The actual duration of Kenya's nation-scope blackout turned out to be 30 hours or so. The Kenya Power and Lighting Company, unfortunately, is being documented as making statements falsifiable by the common man in real-time -- such as power being restored to most consumers by 1 AM on July 23rd, 2000 [a mere 7 hours]. There are divergent reports as to when the blackout started; 5:58 PM on July 22 has also been mentioned. There is a rumor circulating that 90% of Kenya's electric power comes from Uganda. KPLC Managing Director Samwel Gichuru directly refused to answer questions about the percentage of electric power from various sources [Uganda, Turkwell, Masinga and the Independent Power Producers], instead failing to honor a pledge to call The Nation's newspaper reporter at 1 PM.

• Kenya's national electric grid completely crashed at around 6:30 PM. A support pylon for the main grid link between Uganda's Owens Fall hydroelectric station (at the start of the White Nile River) and Kenya collapsed, coinciding with the simultaneous damage of two circuits; emergency repairs sufficient to restore power transmission to Kenya are expected to take about 48 hours. Until then, Kenya's 50 MW import from Uganda via Uganda's Owens Fall power station cannot occur. This coincided with a fault in Kenya's thermal generators on the Indian coast in Mombasa. Power supplies were gradually being restored off of Kenya's residual power capacity, but full restoration must wait on the Uganda repairs. There is apparently a divergence of opinion regarding the cause of the generally insufficient electric grid capacity: the immediate cause is the failure of the long rains in Kenya. The World Bank prefers to attribute it to Kenya's failure to adhere to a construction schedule that would have brought up seven more power plants between 1998 and 2000, and completely ignore the immediate (and very real) causes. [Actually, what would have been interesting was how many of those plants were not hydroelectric. Perhaps there are diversification issues involved.]

• The Crash has begun to arrive in the U.S. The price of importing various canned fruit from Southeast Asia, etc., to the U.S. West Coast has been reduced by the Crash to the point that TriValley Growers, one of the largest farm co-ops that cans produce, has been forced to declare Ch. 11. bankruptcy [on July 11, 2000]. At risk: more than 50% of the U.S. canned peach production capacity, 20% of the U.S. canned olive capacity, and 10% of the U.S. canned tomato capacity. Non-private labels at risk include "S&W Fine Foods, Libby and Libby Lite Fruits, Oberti Olives, Tuttorosso Tomatoes, Sacramento Tomato Juice, Redpack Tomatoes, and many private labels." It is quite possible that some of the crops originally intended for the TriValley growers cannery may be destroyed (by being plowed under, etc.) I consider this pragmatically unethical: if you're going to take a 100% loss on a good crop, why not donate it as a one-shot effort against world hunger??

• The BoJ, citing concerns about Sogo Co. Ltd's recent bankruptcy, held to its zero-interest rate policy.

• It appears that Japan is applying political pressure to the BoJ to maintain its zero-interest rate policy, due to Sogo Co. Ltd's bankruptcy declaration on July 12, 2000.

• South Korea's bank unions have ended their strike. Apparently, they fear mergers more than holding companies, and have agreed to holding companies rather than face a merger. Note that financial holding companies need to be legalized (presumably later this year). South Korea wants to combine the nationalized banks Chohung, Hanvit, and Korea Exchange, and is willing to use a financial holding company rather than a merger.

• Sogo Co. Ltd filed bankruptcy today, seeking protection from ¥1.87 trillion in debt. This was based on a considered evaluation that the LDP was not attempting to make significant concessions to satisfy the New Komeito and New Conservatives political parties...and completely surprised local analysts. Also, Shizuka Kamei (chief of the dominant Liberal Democratic Party's policy-making body) told Sogo to drop its request for help on July 11, 2000. [At least, as reported by the Jiji news agency.]

• Apparently, Shinsei's bank's resale to a U.S. investment group is so expensive, that Standard and Poor's has referred to it as "the most inefficient and costly bailout scheme in the world." Other companies that plausibly would be treated analogously to Sogo Co. Ltd. are the construction companies Hazama Corp and Kumagai Gumi Co Ltd.
• South Korea's bank unions started a strike today. South Korea's Finance Minister Finance and Economy Minister Lee Hun-jai said that the unions' demands to put off bank reforms are unacceptable.

• It has become clear that the LDP's proposed bailout of Sogo Co. Ltd. was not formed by the usual political methods. The LDP's current intent is to form a mutually approved plan by July 14, 2000. The LDP is starting off in a weak position, since the original plan was formed without consulting the LDP, New Conservatives, or New Komeito political parties.

• Kenya's power rationing has been boosted to over 12 hours/day of blackout, seven days a week, for this week. While short-term hopes for relief depend on power imports from Uganda [planned at 80MW], this has already proven problematic [predictable minimum imported is 50MW].

• Japan's proposed bailout of Sogo Co. Ltd. has a consensus deficiency. Overt opposition proved documentable (by various news agencies) among the New Conservatives, the New Komeito, and the LDP -- in other words, members of all three factions of the ruling coalition have not been properly consulted.

• South Korea's government plans to go ahead with a second round of bank restructuring, in spite of a threatened mass strike by bank workers' unions provoked by the prospect of massive job losses. These workers would much rather disrupt the political connections that forced banks to make unviable loans.
• Japan's personal consumption index fell 1.9% from May 1999 to May 2000.

• 25 people were injured in clashes between riot police and Pakistani traders in Rawalpindi, twin city of Islamabad. Several dozen traders were arrested. Out of over 400,000 survey forms distributed, roughly 90,000 have been collected.

• Pakistani traders tried to march on a police station in Multan. Tear gas proved ineffective in breaking up the crowd, as was shooting in the air. However, one policeman apparently misheard his orders and shot into the crowd -- which worked. Four traders were wounded, and one was hospitalized in critical condition.