Evening star. [volume] (Washington, D.C.) 1854-1972, 1924-02-17
JAPANESE L0ANB|C
HELP T0u.S. TRADE
Island Empire Now Has
Needed Credit for Dealing
With Markets Here. :
YIELD Is DECLARED FAIR
Criticism From Japan Believed I'm
warranted-Lull in New
Issues Necessary.
YIELD is DECLARED FAIR
BY GEORGE II. HUGHES.
Special Dispatch to Tie Star


NEW YORK, FEBRUARY 16-rhs
standing event of the week in the In
Vestment market was the successful
placing of the Japanese loan. The
operation was notable in severn,
ways: in the first place IL was the
largest peace-time long-term foreign
loan ever placed in this market,
Even with investment conditions
sound as they are the
achievement was remarkable. In the
second place the large support from
corporations was insignificant. 1t
testified not alone to confidence in
the security but to the expectation
OF substantial benefits to American
trade. Economists have been saying
for a long time that il the United
states expected to do business on any
large scale with foreign customers it
must provide credits and one way 10
do this Is by the absorption of just
such foreign loans.
Criticism Unwarranted.
Cables from Japan reported dissat-
lsfaction among the japanese at the
rate OF interest the government was
obIiged to pay for It's funds obtained
abroad. The feeling over there seem
Cd to be that Japan was not treated
fairly by the American and British
bankers. AS far as can be seen here
this criticism is unwarranted. The
BEST opinion among banking circles
or America is that the rate was in
keeping with the general market, all
things considered.
1t must not be forgotten that II
was essential TO offer q sufficiently
large return to insure success There
is also among American investors
more or less prejudice against for
eign investments, illogical and un-
founded perhaps. but nevertheless
real. The bankers had also to con-
slider the particular prejudice that
until very recently has been felt in
certain circles against Japan. Prob
ably the limitations Of arms confer
ence at Washington and the universal
sympathy for Japan following the
earthquake disaster have done much
to remove this prejudice, but the
bankers could not be sure OF this.
Strong Appeal Necessary.
1t is likewise probable that some
doubt might have arisen over the
quake upon Japanese resources. All
these matters operate to affect the
market price of a foreign security
Whether or not such trejudices and
such opinions or even such mis-
givings are justified is beside the
point. \They must be taken into com
sideration in the fixing of the Offering
price of foreign loan.
There is another side to the prob
lem which the investment banker
ton to the individual American in
weston as we'll as to the foreign borr
rover. If the price at which this loan
had been offered to the American pub
lie was as high as the Japanese opin-
ion would like to have it. there Is no
dictate support is withdrawn the mar
ket quotation would not have suffered
a sharp decline. This has happened
many times, not only with foreign
loans. but with domestic as well.
Sometimes also 1t has been due to
the fact that the original Offering
price was too high. One or two In
stances of this kind make q bad Inns
preston upon the minds of the Gus,
toners OF these investment houses.
Yield COnsidered Fair.
AS q matter of fact. while the
yield on the new Japanese bonds is
a little higher than afforded by tLy
Dutch East Indies and Denmark, 1t Is
not out of line with the market price
of the Japanese tours OF 1881. 1t IL
certainly a. much lower yield than
OHcT60 ny the DOuQS OF
the French government or OF the
French provincial and municipal oblis
cation. It Is much lower than that
given by the bonds of the central
European governments and finally II
is much below that given by obligas
lions of South American countries
which have reasonably good credit.
The best answer to the Japanese criti-
cism of the price will doubtless be
found in the future market action OF
the bonds. although that obvioust
depends in part, at least, upon gen:
eral investment conditions.
Rest Period In Order.
Taking up the investment situation
as q whole, the large amount of new
offerings since the first of the year
would indicate that a rest period was
in order. It takes time to digest such
large blocks Of new securities, even
when surplus funds and credit are as
plentiful as they are today. This Is
not to say that any large reaction is
to be expected. AS q matter of fact
the bond market was remarkably
steady Notwithstanding the break in
new bonds. There is no reason In
money conditions why 1t should not
continue so. This of course. does not
apply to those highly speculative
bonds which share the fate of specu:.
iative stocks. It remains true. how
ever. that surplus funds must f1nd
employment somewhere and somehow.
Neither business nor political changes
can modify this principle. ),
Good Outlook for Prontx.
Meanwhile traffic on tho railroads
IL moving at q record rate. Loadinss
for the week ending January ~, were
larger than ever before In any single
January week. There Is no reason TO
change opinion that the business out
look for 1924 promises reasonable
profits to reward conservative NAM
Copyright. Iss4.)