Tokyo -- What does the Tokyo Stock Exchange's 1992 plunge mean to Americans and others outside Japan?
Almost since Tokyo's bear market began 27 months ago, Japanese and foreign analysts have warned that financial markets here would send out shock waves that would rock the rest of the world if the exchange ever fell much below half of its peak value in the booming 1980s "bubble economy."
Most said the danger to foreign economies would lie somewhere under 20,000 points on the Nikkei 225, the most-watched Tokyo stock index.
The Nikkei closed last week at 17,850.66, after a Friday rebound of 1,252.51 points. That reclaimed more than half of the nearly 2,000 points it had lost in the preceding four days. But it has dropped 25 percent since January and has been under 20,000 for most of the past four weeks.
The impact has clearly not been as feared. And unless foreign markets fall into the trap of "sympathetic" plunges, Tokyo's bad news should take months to play out overseas, with most analysts agreeing on several broad areas of impact:
* Higher Japanese financing costs. The 1992 declines in Tokyo stocks signal an end to the all-but-free investment capital Japanese corporations have long enjoyed.
"For years, Japanese companies had unlimited funds to take advantage of other countries' recessions -- buy market share and cripple the competition before good times came back," said Scott Foster, senior financial analyst here for Smith New Court Asia, a British investment firm.
"That was already harder politically as the U.S. and Europe began to clamp down," he said. "Now, shorter capital at home will cut into their ability to out-invest the rest of the world."
* Scarcer capital worldwide. Japanese banks, the world's most aggressive lenders throughout the 1980s, already faced severe capital problems. As 1992 opened, one of those was the loss of about 40 percent of the value of their huge stock portfolios during the first two years of the bear market. Now stocks have gone down 25 percent from their early January levels.
"Japanese banks will become more and more cautious throughout this fiscal year," Tetsuo Tsukimura said the week after the Nikkei last saw 20,000. Mr. Tsukimura is chief economist for Smith Barney, Harris Upham Tokyo.
* Slower growth in Asia. With Japan, Europe and the United States all in the doldrums, the rest of the Pacific Rim's reduced but still-robust growth has been one of the globe's last remaining economic bright spots. But much of that growth has been fueled by Japanese companies aggressively moving labor-intensive and pollution-intensive factories offshore.
"Southeast Asian politicians and businessmen are already complaining that Japanese projects are being delayed and loans from Japan are harder to get," Mr. Foster said. "This kind of stock market will only make Japanese companies and banks slower to act in the rest of Asia."
* Tougher exports to Japan. President Bush's January drive to make exports to Japan create "jobs, jobs, jobs" for recession-weary Americans couldn't have been worse timed. Japan is the United States' No. 2 export customer, after Canada, but consumers here already had been tightening their belts for nearly a year by the time Mr. Bush arrived.
"They'll feel poorer yet when they see where their stocks are now, won't they?" Mr. Foster said. "When assets shrink, people BTC tend to buy less of everything, including imported things, except where imports are a chance to save on necessities. Japan is unlikely to contribute much to a U.S. recovery any time soon."
* More Japan-U.S. friction. Japan's always-controversial trade deficit with the United States already had resumed slowly growing in the second half of 1991, after declining from about $50 billion range to about $40 billion range over four years. The Nikkei is now in a range some Japanese economists believe might further slow Japan's economy and hence its imports.
"There is no prospect," of making good on Prime Minister Kiichi Miyazawa's January promise to Mr. Bush that Japan will achieve a 3.5 percent annual growth rate in the current fiscal year, Mr. Tsukimura said. "The Japanese government will face mounting pressure from the United States."
Meanwhile, after weeks of tumbling stock prices, debate continues about the market's future.
Friday's rebound may have reflected investors' relief that there were natural limits to a sell-off of corporate cross-holdings that market players believed was under way for much of the week.
But Mr. Tsukimura and Mr. Foster are among those who think the Tokyo bear market still has a long way to run. A year ago, when the Nikkei was in the 24,000-26,000 range, Mr. Foster was one of a handful of analysts suggesting today's under-18,000 level.
Mr. Tsukimura declined to forecast a bottom in terms of stock prices. But he suggested earnings levels and price-earnings ratios he thinks are likely before the Japanese economy swings into recovery. Translated into a Nikkei average by other analysts, his figures come out in the 8,000-10,000 range.
"Yeah, that's about what I think," Mr. Foster said when asked about Mr. Tsukimura's gloomy-sounding numbers. "It could be 8,000-10,000."