 Japan investors embracing government bonds
Advertiser News Services
TOKYO — Reflecting Japan’s political paralysis and pessimism about its near-term economic outlook, its stock market continued to drop today, despite new economic data showing slightly stronger growth than economists had expected.
The Nikkei 225 fell 231.60, or 1.9 percent, to 11,939.77, on course to the lowest close since Feb. 7, 1985. The broader Topix index of all shares on the Tokyo Stock Exchange’s first section fell 27.54 or 2.3 percent, to 1178.44, the lowest level since March 9, 1999.
The sinking Japanese economy, along with an ongoing slump in U.S. growth, raised fears of a broader global economic slowdown. Most analysts doubt that such a slowdown will be severe enough to have much of an impact on the U.S. economy, but simultaneous downturns in Japan and the United States, the world’s two largest economies, are bad news for other major exporting countries such as South Korea and Canada.
Adding to the gloom were statements by Prime Minister Yoshiro Mori denying that he had expressed his intention over the weekend to resign as head of the ruling Liberal Democratic Party. "I have absolutely no intention to state such plans," Mori told members of the upper house of parliament. Because of the LDP’s power in parliament, the LDP president is usually also prime minister.
Mori appears determined to stay in office long enough to meet with President Bush at the White House on March 19 and with Russian President Vladimir Putin on March 25 in the Siberian city of Irkutsk. He vehemently denied that he was a lame duck.
Mori’s protestations notwithstanding, senior LDP officials held more backroom meetings on who would take over the prime minister’s job and lead the embattled party into crucial parliamentary elections in July. A survey by government broadcaster NHK released yesterday evening showed that only 8 percent of respondents supported Mori’s government.
Japan’s market decline apparently was a response to concern that economic reform may take a back seat to the political maneuvering and to the collapse of the high-tech Nasdaq market in New York. The Japanese market tumbled despite new government statistics showing the country’s economy grew 0.8 percent in the quarter that ended Dec. 30. In contrast, third-quarter growth shrank 0.6 percent.
The growth in the fourth quarter represents an annual rate of 3.2 percent. But analysts noted a troubling slowdown in consumption, which makes up more than half of the output figure.
The data showed that Japan continues in a deflationary spiral of falling wages and prices. The primary measure of inflation dropped 1.7 percent and the average paycheck decreased by a nominal 0.8 percent. With prices declining, fervent Japanese savers have even less reason to spend, since a TV set or automobile may be cheaper in six months. And with unemployment rising, many fear for their jobs.
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