Evening star., 1923-09-09
JAPAN NOW OFFERS
TWO BIG PROBLEMS
Power to Buy Materials May
Be Hampered by Greatly
DiSbursed Credit.
LOAN BELIEVED LIKELY
Hesitation Noted in Markets in
U. S. During Week-Bond
Test Approaching.
LOAN BELIEVED LIKELY
BY GEORGE T. HUGHES


Special Dispatch TO The Star
NEW YORK. September S.-Discus-
sion AS TO the future of the security
markets this week has centered around
the probable effect of the Japanese dis
aSter upon trade and finance.
There are two widely varying opin-
ions One is that the demand for ma :
terials TO reconstruct the devastated
areas will stimulate trade. Emphasis Is
placed especially upon the large re
quirements for steel In line with TINS
argument there was moderate specula :
tion for the rise in steel stocks. The
other view is that the enormous de-
struction of capital will make such eH-
tenSive drafts upon the money marker
as greatly to disturb the financial
equilibrium. The effect upon the mar
ket of the San Francisco disaster is re-
called by those who hold this opinion.
Merit In Both Views.
Doubtless there is merit in both OF
these viewpoints. Japan will certainly
require large amounts of material Tor
reconstruction purposes. Some puSins
along TINS line has already been report
ed. but probably it is largely specula-
tive. 1t must certainly be sin months
or more before much actual work can
be done. Nor is there any certainty
that the bulk of this material will be
turn to the market where she can buy
the cheapest.
AS to the financial result on securi-
ties, the case is somewhat different
from that of San Francisco. Then
American insurance companies suffered
heavy losses. Now il is the British
that will probably be most affected;
and To the British companies, their
losses will depend upon what reStriC-
lions as to damages by earthquakes
10
insurance companies, either in England
or America. are forced to market large
amounts of securities il viii necessarily
cause some depression.
japanese Loan Probable.
1t also srers probable that the Japa
nese government will be forced 10 float
= loan either in New York or London.
That such loan would be readily taken
nc one doubts. TIE japanese credit
stands very high. The best proof OF
this il the way the Japanese govern
mcnt bonds stood up under the selling
which followed the fl 81 news of the
disaster. Prices OF the two sterling A.:
per cen; loans traded in on this market.
today for instance, are only about two
points below the high of The year.
That. OF course. is good deal in the
case III bonds with such Sito.t matur-
tiles. both issues falling rua in 1928
The sterling Is of 1891. the other issue
listed on the New York StocH Exchange.
the obligations of the city of Toxic,
which was the center of the region at
footed. had u Very sharp decline Still
the Important point lS the demons l-l
tion of confidence in Japanese financial
stability.
All Markets iifsitatinG.
Under the uncertainties bred of the
japanese horror. the Italian controversy
with Greece and the doubt about tn.
"uthraCite coal situation, ali the mar
kets have hestated. Spectators nave
not cared 10 take position until The
situation became Il little more clear.
investment buying has been at stand
still. but that has been the case for Il
long time. There is 4 large amount q;
new financing scheduled for the autumn
months. the reception uf which will ID,
better demonstration Of investment
sentiment than the day-to-d;.y t,uctua :
tionS in stocks or bonds. Most of this
financing has been held back until afitr
the vacation season.
Real Band Test Ahead.
II loo Ks now a. though good deal
would be- still further delayed. The
new mon Pacific retunding rs were
well received. but a bond of this grade
appeals only to institutions. ani trus-
tees. The real test will come whei.
securities yielding Il2 To Si2 per cent
are offered in any large volume
Another very important considera- =
ton is the attitude of the invest
ment public toward railroad secur-
itles. the idcai railroad financing
from the StaHdloiHt oi the roads
would be the sale Of common stock.
hut this looks like an Impossible
achievement under present conditions
Very few roads could even mar h Il
preferred stock. The problem of re-
storing railroad cradit is one of th-
most difficult tina faces either the exec
utlVeS or the bankers.
Railroad Problem Puzzling.
That record breaking car loadings
viii not suffice is evident from the
action of the market tor railroad
stocks. Sentiment toward these Sc
curitieS is a little more favora BILE this
week than for sometime, but still
leaves much To be desired. When
the shares of such prosperous roads
as the New York Central and the
l lniOn Pacific are selling 10 return I
per cent and more. while those of a
road like the Pcre Marquette yields
9 per cent on the investment il is
quite evident that railroad stocks
have fallen from the high estate they
held before excessive government
regulation became a standing men
ace.
The case of the roads not financial =
iy strong is even more difficult New
Haven junior bonds. for instance. sell
on 10 per cent higher basis. st. Paul
issues. except for the general mort
gage bonds, return from 5 per cent
up. Neither of these roads is typical
of the general situation, but their
condition acts as deterrent to in
veStment interest in roads more for
tunately situated. Incidently ii is in
tereSting to note that the New Haven
carried a smaller number of tons oil
revenue freight in 1922 than it did In
1912. Traffic in 1929 showed up much
better. but motor truck competition