Stock market lag prompts fears for Japan's future
By Yuri Kageyama
Associated Press
TOKYO — Fears are growing in Japan that the relentless slide in Tokyo's stock market might topple companies or major banks and further harm an already hobbled economy at a time when the government is finally getting serious about solving the nation's debt mess.
The main index on the Tokyo Stock Exchange plunged again late last week, closing at a new 19-year low for the third time in just five days. At one point, the 225-issue Nikkei Stock Average fell 1.17 percent to 8,439.62 points, its lowest finish since April 8, 1983.
"Japan is going to sink and turn into a nation of beggars," said Masaoki Takahashi, 58, whose land development business has been struggling to obtain bank loans. "It's a big mess."
Like many Japanese, Takahashi was worried that Prime Minister Junichiro Koizumi seemed to have no plan to salvage the economy.
The stock market has been lagging at 19-year lows for weeks. But the plummet took a turn for the worse shortly after Koizumi picked a new Cabinet on Sept. 30 and placed economy minister Heizo Takenaka in charge of financial services.
Takenaka promised to speed up the cleanup of bad debts at the banks in a "quicker, larger-scale and more understandable" way.
The promise was supposed to reassure investors and analysts, who have complained that bad debts in the financial sector are a drag on Japan's economy.
Instead, Takenaka's comments set off fears that corporate bankruptcies — even of major banks — may be inevitable. Investors have been fleeing in droves.
The Nikkei Stock Average, which stood above 9,300 at the end of September, has shed about 10 percent in this month's eight trading sessions.
One big problem for Japan is deflation, in which prices continue to drop, eroding the value of assets as well as collateral for loans.
"Trying to tackle bad loans without first dealing with deflation is simply a crazy feat," said Yasushi Okada, chief economist at Credit Suisse First Boston in Tokyo. "The prime minister is more interested in structural reform and doesn't really care about economic recovery."
Late last week, Koizumi's spokeswoman, Misako Kaji, seemed to shrug off worries about the stock market and denied the government was considering any specific measures to stem the nose-dive in share prices. "The fall in U.S. and European stock markets are also behind this," she said, adding that an economic package was being planned for later this month.
"There can be no economic recovery without structural reform," is Koizumi's pet slogan. And he often appears more determined to wipe out corruption and waste than rely on old-style bailouts to stimulate economic growth.
Although widely praised for trying to stick to reforms, Koizumi has delivered little so far for average Japanese looking for an economic boost.
The unemployment rate remains at a near-record 5.4 percent, consumer spending is flat, paychecks are shrinking and the weak recovery remains heavily dependent on exports.
Recent signs that the pace of the U.S. recovery may be slowing is also a concern.
Dubious loans at the nation's banks are estimated by the government to total about $324 billion. Private analysts say the amount could be twice that figure or more.
Koizumi has balked at doling out public works projects, which his predecessors have used to boost the economy. Japan's public debt has ballooned to about $5 trillion, or 135 percent of its gross domestic product, higher than any industrialized country.
