TOKYO MEDIA REACTION - LEHMAN COLLAPSE

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