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No. 350, November 1998

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Japanese Companies in the US


The need to raise money to finance the write-off of bad loans plus a strong American stock market led DAI-ICHI KANGYO BANK, LTD. to sell a large block of its CIT GROUP, INC. shares. The secondary offering, one of the biggest ever, generated more than $1.3 billion for the major commercial bank. In the process, DKB reduced its stake in the New York City-headquartered commercial finance provider to about 47 percent from 77.2 percent. In September 1997, CIT Group, which has had record-breaking profits every year for the last seven, went public through a large initial public offering.

Japanese banks no longer can afford the luxury of holding onto low-yielding assets. That reality apparently was behind the decision by SUMITOMO TRUST & BANKING CO., LTD. to sell BOULLIOUN AVIATION SERVICES INC. to DEUTSCHE BANK AG for $120 million. The Bellevue, Washington aircraft leasing company owns 46 planes, mostly 737s, that are leased to airlines around the world. It reportedly has 100 planes on order. Sumitomo Trust bought Boullioun in August 1994 for an undisclosed price.

Notwithstanding the financial problems of much of corporate Japan, American companies that do business over the Internet remain attractive investment options. For example, MC CAPITAL INC. and MC SILICON VALLEY INC., both U.S. subsidiaries of MITSUBISHI CORP., participated in the latest round of fund-raising by WIT CAPITAL CORP., the world's first on-line investment bank. The Manhattan company participated in 31 public offerings in its first year in business. It also has access to more than 2 million on-line investors either directly or through agreements with other on-line brokerage houses. Moreover, before yearend, Wit Capital plans to launch the Web's first digital stock market, which will allow investors to trade NASDAQ and listed shares directly with other investors, thereby avoiding spreads.

MITSUI TRUST & BANKING CO., LTD. is joining the exit of Japanese banks from the United States. By the end of March 1999, the number-three trust bank's New York City subsidiary will give up its banking license and become an investment advisory firm, and a branch in Los Angeles will be closed. The pullback is part of an across-the- board retrenchment from overseas operations. When completed, Mitsui Trust no longer will have to meet the 8 percent capital adequacy ratio for internationally active banks. Instead, it will be subject to the 4 percent capital/asset ratio for banks that operate solely in Japan.

An exchange rate of ¥121=$1.00 was used in this report.

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