Reading the English newspaper

  1. l. Read the article and do the exercises.

Spring Fever

“The Economist”

A new device to embellish the books of Japanese companies.

In the spring, a Japanese politician’s fancy usually turns to propping up the stockmarket. In years gone by, Japan’s policymakers have suddenly tightened rules on short-selling and dreamed up a public stock-buying entity to shore up prices in time for March 31st, the end of most companies’ financial year. This has boosted the book value of corporate cross-shareholdings — a boon, in particular, for the country’s banks and life insurers. Not since 1982, however, has the Nikkei 225 stockmarket index ended March as low as it did this year. Many companies have large, unrealized losses in their equity portfolios.

The ingenuity of the old guard in the Liberal Democratic Party (LDP), which leads Japan’s governing coalition, is not yet exhausted. If stockmar- kets refuse to rise, these politicians will do the next best thing: revise accounting regulations so that sagging share prices need not be reflected in companies’ year-end accounts. Led by Hideyuki Aizawa, head of the LDP’s powerful committee on anti-deflation policies, and Taro Aso, the party’s policy chief, they are putting the finishing touches to a bill that temporarily suspends mark-to-market accounting for banks, life insurers and 10,000-odd listed companies.

The bill will enable companies to choose whether they want to value their “long-term” equity holdings at acquisition cost, or at market prices. The idea draws on a similar exemption for bonds that life insurers plan to hold to maturity, even though, unlike bonds, equities do not mature. It is not clear how long the freeze will last; estimates range from two to five years.

The LDP, concerned that falling property prices will dent corporate accounts, also wants to delay by two years the introduction of impairment accounting for fixed assets, currently scheduled for 2005.

The politicians want mar- ket-value accounting to be suspended by May, before companies have to report their earnings for the previous financial year. At their urging, the Accounting Standards Board of Japan, an independent body that supposedly sets accounting standards, has agreed to study these proposals on April 17th. Still, the accounting body is unlikely to adopt the plan in time for May, if at all.

That may not matter: the politicians’ efforts are gathering steam, and they are ready to push through a privately sponsored bill within the next month or so, even without the accounting board’s support. Still, the bill will probably only help a few companies. Those that revert to valuing shares at purchase prices will immediately look weak. Besides, say analysts, it will be fairly easy to calculate roughly how their books would have looked had they stuck to market-value accounting. A recent survey of 225 listed companies by the Nihon Keizai Shimbun, a newspaper, found that 83 % would still mark to market.

So why are the politicians so keen? Most likely, they want to help the struggling, mainly mutually owned, life-insurance industry, which is thought to have had unrealized equity losses of? 2 trillion ($ 16.6 billion) at the end of March. Regulations say that if a life insurer’s capital, dented by such losses, falls below a certain level, the firm may not make interest payments on certain types of subordinated debt: in effect, it must default. The negative publicity could then lead to policy cancellations and even the collapse of some insurers. Freezing market-value accounting would wipe unrealized losses from the books.

The LDP’s device may yet fail. It is opposed bitterly by some within the party and by regulators. Hirofumi Gomi, head of the supervisory division of the Financial Services Agency, Japan’s financial regulator, says that changes in accounting practice should be left to professionals. “Personally, I am against the proposal,” he says.

“This will lead to a loss of confidence in Japan’s financial markets.”
  1. 2. Answer the questions.
  2. Why are the Japanese politicians interested in propping up the stockmarket in the spring?
  1. What measures will the LDP’s leaders take in case stockmarkets refuse to rise?
  2. What opportunities does the bill provide for the Japanese companies?
  3. Why does the LDP want to delay the introduction of impairment accounting?
  4. Why are the politicians so keen?
  1. 3. Decide whether these statements are True (T) or False (F).
  2. The fact that Japan’s policymakers tightened up rules on short-selling has become an advantage for the country’s banks.
  1. The bill will advance the mark to market accounting.
  2. Bonds do not mature unlike equities.
  3. The plan will not be adopted till May.
  4. Without the accounting board’s support politicians are unlikely to push through a privately sponsored bill.
  1. 4. Match up the words with definitions and translate them into Russian:
  1. short selling;              a)              to make (a statement or story) more interesting by adding

untrue details;

  1. propping up;              b)              to fall in value, amount, or level, especially for a short time;
  2. to embellish;              c)              debt that a borrower in financial difficulty will not repay

until after other debts are repaid, or of which it will repay a smaller percentage;

  1. boon;              d)              when a trader sells shares immediately after buying them,

and then buys them back later, making a profit because the price of the shares has fallen;

  1. to sag;              e)              to officially stop something from continuing or happening

for a short time;

  1. impairment;              f)              something very helpful or useful;
  2. subordinated debt; g)              supporting, keeping from falling or failing;
  3. to suspend.              h)              weakening or making worse.
  1. 5. Read the article once more, find the sentences containing the past participles and translate them into Russian.
  1. 6. Make up the outline of the article and then render it.
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Источник: Е. Н. Малюга. Английский язык для экономистов: Учебник для вузов / Е. Н. Малюга, Н.              В. Ваванова, Г. Н. Куприянова, И. В. Пушнова. — СПб.: Питер,2005. — 304 с.: ил.. 2005

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