Cablegate: Tokyo Media Reaction - Us Rate Cut

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UNCLAS TOKYO 005109

SIPDIS

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 - US RATE CUT

LEAD STORIES: Most Friday papers led with the
suspension of the MSDF refueling operation in the
Indian Ocean.

"Fed on Tightrope" The business-oriented Nikkei
editorialized (11/2): "The US Federal Reserve Board
decided at its Federal Open Market Committee meeting on

Wednesday to make an additional cut in the federal
funds rate. Although the move is aimed at preparing for
a possible slowdown in the US economy following the
recent turmoil in the housing market, speculative money

is flowing into the commodities market and pushing up
the prices of oil and gold. The Fed is facing a
challenge to prevent inflation from undermining
international confidence in the US economy.... If the
influx of money into the commodities market unleashes
investors' concern about inflation risks, international

confidence in the Fed's monetary policy could be
eroded, and foreign investment in the US could
decrease. The turmoil in the US and global economies
could continue unless the Fed properly deals with the
housing and commodities markets. The Federal Reserve
Board needs to make a clear judgment and take prompt
action."

SCHIEFFER

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