Tokyo's Nikkei hits 18-year low, sentiment "awful"

Reuters via Yahoo Finance ^ | Monday September 2, 11:48 pm ET | David McMahon

[staytrue]

TOKYO, Sept 3 (Reuters) - Tokyo's Nikkei average dropped to an 18-year low on Tuesday as tech-related shares led a broad-based decline sparked by growing concern about the sustainability of Japan's fragile economic recovery.

"Market sentiment is absolutely awful right now. Stocks look very cheap at these levels but nobody is ready to buy yet," said Masaharu Sakudo, an adviser at Tachibana Securities.

The Nikkei (^N225 - News) dropped 1.67 percent or 159.10 points to 9,362.53 after falling as far as 9,269.10. On November 10, 1983, it closed at 9,244.24.

The capital-weighted TOPIX index (^TOPX - News) shed 1.61 percent to 915.40, its lowest since December 1984.

"It was only a matter of time until we fell this low," said Masanori Hoshina, head of global portfolio marketing at BNP Paribas.

"Part of our weakness lies in concerns about the cloudy economic outlook in the U.S. But the key problem is that there are still no signs of a sustainable economic recovery in Japan," he added.

Data on Friday showed the Japanese economy grew at a faster-than-expected 0.5 percent in the April-June quarter, but industrial production fell unexpectedly for the second straight month in July and other data showed deflation worsening.

Declines in prices make it harder for Japanese companies to service their mountains of debt, adding to pressure on banks.

High government debt levels are also a worry.

"With a public debt of around 140 percent of GDP, the Japanese government doesn't have many cards left up its sleeve," said Hiroshi Nishiyama, senior portfolio manager at SG Yamaichi.

"But the perception is growing that this government's economic reforms are going nowhere. Without some decisive action, such as a cut in the consumption tax to rev up spending, I can't be optimistic about the outlook for stocks."

BANKS BATTERED

Against such a backdrop banks were pummelled. Mizuho Holdings Inc (Tokyo:8305.T - News), the world's largest bank by assets, plunged 7.23 percent to 231,000 yen and was the highest traded issue by value on the first section of the Tokyo Stock Exchange. Rival UFJ Holdings Inc (Tokyo:8307.T - News) slipped 4.18 percent to 252,000.

Japan's megabanks have large holdings of stocks on their books and falls in the stock market eat into their capital base, increasing fears of financial instability.

Japan's high-tech exporters were also hit hard.Consumer electronics giant Matsushita Electric Industrial Co Ltd (Tokyo:6752.T - News) dropped 3.05 percent to 1,369 yen, while rival Toshiba Corp (Tokyo:6502.T - News) shed 2.25 percent to 391 yen.

Another notable loser was Tokyo Electric Power Co Inc (TEPCO) (Tokyo:9501.T - News), which extended its losing skid to six straight sessions and was down 1.46 percent on the day at 2,360.

Shares in Japan's biggest power utility have come under heavy pressure since it said last week that it may have failed to accurately report cracks in its reactors.

[staytrue]

The Nikkei is trading at about 9300 which is about where it was in 1983. Futures are indicating US dow jones opening down 100 pts.

[Ken H]

Nikkei-- http://quote.yahoo.com/q?s=^N225&d=1d

[Ken H]

Overnight nasdaq, dow-jones, gold, etc.-- http://www.mrci.com/qpnight.asp

[Timesink]

Japan's economy is doomed IMHO, unless they finally become willing to face the facts that they're not using a truly capitalist system. An economy based largely on an Old Boys Club (good luck getting in if you're not already there), bribery, fuzzy accounting, a barely-functioning real estate industry, etc, simply cannot last forever. It's somewhat like the late 90s dotcom fraud here, only in much slower motion and much more widely distributed. Their problems at this point are entirely due to outmoded cultural traditions and inane laws. Clean out the cultural cesspool and rewrite the laws, and they can start making money again - after a number of years of volatility.

[Bogey78O]

Yatta
If ever it was needed.....

[TigerLikesRooster]

Re #4

I am afraid that "geniuses" in Wall St. have been thinking that they are above the failings of Japanese. They said it can never happen here. But it is. Here, it is the old-boy/girl-financial-clubs. In Japan, entire bureaucracy helps it along. That could be the main difference. Japan's economy will collapse. Even many Japanese sense that. They basically gave up. They will have truly volatile years ahead before the dust settles. And it won't be the same Japan.

[cynicom]

Japan is looking west to China. Throw in with China, or go it alone in Asia. Japans heady glory days are over. In the hi-tech world, only so many people are customers in this world, China has taken over the nuts and bolts business from Japan, earning needed dollars world wide.

[Moonman62]

Japan has been practicing twelve years of demand management, with the ever increasing loads of government debt and economic underperformance that go along with it. In the United States, it's known as Bushonomics. And this quote from the article: "Without some decisive action, such as a cut in the consumption tax to rev up spending," it's apparent that the Japanese aren't about to change their losing economic ways, and neither will Bush.

[pseudogratix]

LOL! My kid has a tape with this song on it that he listens to all the time in the car. I had never seen the video and wondered who the heck was singing it. Thanks for the link!

[lds23]

The Japanese banks are propping up way to many failed companies. Part of the free market system is that the failures actually fail. Until and unless they clean house, this sort of thing will continue.

[SauronOfMordor]

Futures are indicating US dow jones opening down 100 pts.

Make that down 122 as of 8:53 EDT

If the Fed's market manipulators had just let things take their course, we would probably be done with the crash by now and be on the road to recovery. But no, they had to insert some dead-cat-bounces to allow the big guys time to get out.

[eno_]

I will be proven right: When anyone asks when I will buy stocks, I answer "The day after we invade Iraq, becuase then only the strong will buy." It ain't over until we get past the really scary event, which will be an invasion, or an attack that prompts an invasion.

[staytrue]

I don't understand how you can blame Bush for 19 years of a flat japanese stock market or the 13 years of the nikkei bear market. At one time, the japanese real estate market was valued at a higher level than the US market. Besides, I think Clinton was in for most of the decline. It was a Clinton stock market bubble in the US along with Rubin and the plunge protection team that kept the US stock bubble moving along.

[1Old Pro]

Funny, everyone in the liberal media has said for decades that WE should copy their successful style. Thank goodness America has stayed America. The Leftists want all nations to fail so the U.N. can govern and the World Economy can be a controlled socialist economy bent on redistribution of nations wealth.

This is why AMERICA SHOULD ATTACK IRAQ. We should do it because it's right, just, and in our interests. Forget what these failed nations recommend.

[Pining_4_TX]

The Japanese banks are propping up way to many failed companies. Part of the free market system is that the failures actually fail. Until and unless they clean house, this sort of thing will continue.

Amen to that, brother. They should cut taxes and open up their markets to competition. Yes, many businesses will fail, but others will come in to take their place. This seems to be something that people all over the world have trouble understanding, including here in the US. Bush should never have slapped on those steel tariffs or signed that obscene farm bill. Failure is a necessary part of economic growth.

[afz400]

Japan is in trouble because Korea and now China have undercut them with cheap slave labor (30 cents and hour in China) and unlimited pollution (you cant even breathe in China now -estimated 1 million dead per year but who cares with a population of billions). But guess what? Vietnam is getting poised to even undercut China on wages. Meanwhile we wring our hands about the evils of past slavery in this country and continue to buy at WalMart and Rooms to Go whose whole sucess is based on Chinese slave labor. We are truly a once great nation that in one generation has lost all of its moral principles.

[1Old Pro]

Japan put all it's marbles on technology. Now they are losing market share big time in large part because of cheap labor as you mentioned. Their automobile market share is dropping because their cars used to be reliable and cheap, a.k.a. Toyota, Datsun. Now they are expensive and Domestic autos are actually competing again.

[AmericanInTokyo]

Traditional American analyses of Japan (for the last 80 years at least) has been one of a humorous saga occupying two extremes of the pendulum movement.

It alternates (usually in 15-year increments) between the polar opposites of the galvanized paranoia "Japan Will Rule The World!" (Russo-Japanese War, Pearl Harbor, Rising Sun) and the abject triumphalist "Japan Is Dead!" (Hiroshima, Nixon Oil Shocks, Bad Bank Debt). Nasakenai!

The analysis I see on FR keeps true to this American tradition, and has swung fully into the defeatest mode.

It shall swing back in not too short a time.

While the truth of the matter is, (equipped with a knowledge of the the highly resilient, intelligent yet limited Japanese), as always, somewhere in the middle.

[dighton]

Somewhat like Talleyrand's "Russia is never as strong as it looks. Russia is never as weak as it looks."

[RightWhale]

Perhaps they should raise their prime rate and collapse their real estate bubble. Once that is sorted out, they can get back on track.