Japan faces recurring stock crisis Analysts see few indications of economic rebound

November 06, 1993|By Thomas Easton | Thomas Easton,Tokyo Bureau

TOKYO -- With little fanfare, the Japanese are once again living through an extended stock market nightmare that borders on being a recurring crash.

Since September, stocks have dropped about 12 percent, much of the decline occurring in recent weeks. Yesterday, the bellwether 225-issue Nikkei stock average fell almost 360 points, to 18,590.46. That's about 1,700 points below where it stood at the beginning of the week before last and a remarkable 20,325 points below where it stood at its all-time peak in 1989.

The market had appeared to bottom out last year, with prices steadily rising until August, when a popular new government was elected. But the rebound proved fragile.

"This is reality overcoming fantasy," said Paul Summerville, head of research for Lehman Bros. "Essentially," he said, "you have had a market stuck in the water since the spring on expectations that political reform would translate into effective measure to rejuvenate the economy. But it is not clear how much the state can do in the short term because of the challenges of structural change in the country and the depth of the cyclical [business] decline."

Responding to questions, the government's primary spokesman, Chief Cabinet Secretary Masayoshi Takemura said yesterday that emergency stimulus measures to reinvigorate the market weren't being considered. Three emergency packages have already been approved by the Diet, Japan's parliament, without restoring growth to the economy. That, however, is unlikely to put the issue to rest.

Every day brings new evidence of economic malaise. The National Tax Administration announced yesterday that the reported income of major companies dropped 19 percent for the fiscal year that ended in June. Conditions have subsequently worsened. Now is the time Japanese companies announce midterm results, and few have had anything good to say.

Mitsubishi Motors Corp., which brilliantly planned for the current slowdown by expanding elsewhere in Asia rather than in Japan, nonetheless announced a decline in profits Thursday. That may be the best news for an auto manufacturer. Last week Nissan Motor Co. announced a large loss. Statements by Honda Motor Co., Mazda Motor Corp. and Toyota Motor Corp, are all expected to be poor.

Yesterday, all five major Japanese shipping companies disclosed large declines in profits or outright losses. Similarly poor results were announced by Japan's seven major nonferrous metal and mining companies. Two of the companies, Mitsubishi Materials Corp., (profits down 67 percent) and Sumitomo Metal Mining Co. (profits down 89 percent), disclosed intentions to cut thousands of employees.

The list seems endless. Kurabo Industries Ltd., a cotton-spinning company, posted a large loss yesterday. Profits at Kanebo Ltd., a manufacturer of synthetic fibers, were down 92 percent. Earnings at Komatsu Ltd., a construction equipment manufacturer, were down 27 percent. At Matsushita-Kotobuki, an electronics company, profits were down 23 percent.

Many in Japan fear conditions will deteriorate further. The yen's sharp appreciation has swollen Japan's trade surplus when the surplus is reported in dollar terms. But when accounted for in yen, it has begun to contract. Because of the yen's appreciation, numerous major companies recently announced intentions to manufacture in lower-cost countries.

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