Tokyo market plunges below key 20,000 mark

March 17, 1992|By James Sterngold | James Sterngold,New York Times News Service

TOKYO -- Anxieties over the faltering Japanese economy have intensified as the stock market plunged yesterday to its lowest point since 1987, closing below the psychologically important 20,000 level on the Nikkei index.

The closely watched index lost 618.90 points, or 3 percent, to close at 19,837.16 in extremely thin trading -- 200 million shares. The last time the index closed below 20,000 was on Feb. 23, 1987, when it plunged 139.89 points, to close at 19,940.50.

The index sank another 129.37 points by the end of the morning session today, but traders said there were no signs of the panic selling that some analysts had predicted.

In what is feeling more and more like a crisis atmosphere, rumors spread that the government would intervene to insure that the growing nervousness does not turn into a panic and that the seemingly endless erosion in stock values does not further undermine the already shaky confidence in the economy's health.

Although the 20,000 threshold for the Nikkei index means nothing in itself, it has been regarded for years as a make-or-break point, a plank in the stock market's emotional foundations. The market is now in the third year of a deep depression, having given up almost half its value since reaching a peak of 38,915.87 on the last day of trading in 1989, Dec. 29. But it only once slid toward 20,000, on Oct. 1, 1990.

As the indicator flirted with the mark that day, hints from the finance minister that action would be taken sent the market soaring 13.2 percent the next day, for one of the sharpest one-day rises in history. Officially, there have not been any indicators this time of what, if anything, the government might do to prop up prices and confidence. But some expect a reduction in interest rates.

Dan O'Keefe, an analyst with Merrill Lynch Japan Ltd., said expectations were growing for some sort of government bailout and that much of the day's losses appeared to reflect disappointment over a rumor that the Bank of Japan would lower the discount rate by a half-point, to 4 percent.

"We're at the point now where a half-point cut would not be good news," said Yuichi Matsushita, a market strategist at Nikko Securities Ltd. "People are hoping for at least three-fourths of a point."

The tumbling stock market has raised many concerns. One is that corporations will find it increasingly difficult, and expensive, to raise the capital they need to invest and grow.

Corporate profits are already falling rapidly, and companies are slashing their budgets for new plants and equipment. That is rippling through the economy, as orders for new plants and technology fall, for instance, and consumer demand slackens.

The weak stock market is also causing growing problems for Japanese banks. Nearly half of the capital of many large banks is in the form of stock holdings. As the value of those portfolios falls, the banks' ability to expand their lending and fuel economic growth also declines.

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