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Cablegate: Tokyo Media Reaction - Lehman Collapse

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P 170238Z SEP 08
FM AMEMBASSY TOKYO
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UNCLAS TOKYO 002539

SIPDIS

STATE FOR I/RF, PA/PR/FPC/W, IIP/G/EA, EAP/PD, R/MR,
EAP/J, EAP/P, PM;
USTR FOR PUBLIC AFFAIRS OFFICE;
TREASURY FOR OASIA/IMI;
SECDEF FOR OASD/PA;
CP BUTLER OKINAWA FOR AREA FIELD OFFICE;
PACOM HONOLULU FOR PUBLIC DIPLOMACY ADVISOR

E.O. 12958: N/A
TAGS: OIIP KMDR KPAO JA
SUBJECT: TOKYO MEDIA REACTION - LEHMAN COLLAPSE

1. LEAD STORIES: All Wednesday morning papers gave
prominent front-page play to the aftermath of the
collapse of Lehman Brothers, including the worldwide
stock plunge during Tuesday's trading.

2. "Paying the Price for Hesitation to Use Public
Funds" The top-circulation, moderate Yomiuri
editorialized (9/17): "It was clear that no financial
institution would attempt to rescue Lehman Brothers
without financial support from the federal government.
Could the USG not have done something? Some have argued
that the USG should not have hesitated to inject
taxpayer money in order to prevent the financial crisis
from expanding.... The reality is that unless the fall
in housing prices is halted, concern about a financial
crisis will remain."

3. "Bold Measures Needed to Prevent Depression from
Originating in U.S." The business-oriented Nikkei
asserted in an editorial (9/17): "A lasting financial
crisis in the U.S. would have an enormous negative on
the global economy. Instead of taking an ad-hoc
approach to each development, U.S. monetary authorities
should study bold measures, including the massive use
of public funds.... It is true that the USG's refusal
to bail out Lehman has prompted financial institutions
to conclude that the government may not help them out.
However, leaving the issue completely to the private
sector has shown its own limits. The U.S. should
consider mechanisms that utilize the tools available to
the government, such as the creation of a body to
purchase nonperforming loans, in order to ensure that a
resolution of the problem is not put off."

4. "Domino Effect Must Be Avoided" The liberal Asahi
argued (9/17): "The USG must minimize the fallout by
taking pump-priming measures, including additional tax
cuts.... If major banks are hit by crises and the
financial system grinds to a halt, the U.S. will have
to inject a massive amount of public funds in order to
prevent a worse-case scenario. The U.S. is responsible
for preparing for such a contingency."

5. "U.S. Must Do Utmost to Prevent Further Damage" The
liberal Mainichi insisted (9/17): "When the issue of
nonperforming debt became serious in Japan, the USG
called on the GOJ to utilize every policy tool
available in order not to trigger a financial crisis.
The U.S. at present is being called upon to do the
same."

SCHIEFFER

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