Stocks jump nearly 8% in Japan

February 01, 1994|By New York Times News Service

TOKYO -- Stock prices soared nearly 8 percent here yesterday in one of the biggest one-day rallies ever, after the Japanese Parliament broke a major legislative bottleneck by passing political reform bills late Saturday.

The Parliament's action cleared the way for the government to focus on long-delayed emergency measures to revive the economy, sending spirits and stock prices soaring.

It was the fourth-highest rise since the market reopened after World War II, the Tokyo Stock Exchange said. The Nikkei index rose 1,471.24 points, or 7.84 percent, to 20,229.12. It was the biggest single increase since the index rose 13.24 percent in October 1990.

The rally continued this morning, with the Nikkei up an additional 224.13 points, or 1.11 percent, at midday.

At the opening yesterday morning, there were so many buy orders that only about half of the 225 stocks in the index could open for trading initially.

The rally was a source of hope that, even if the market remained volatile in the short-term -- some analysts warned yesterday's ebullient charge might reverse soon -- the outlook might be brighter since the market began its long descent four years ago.

Analysts said the rally was a sign both of the relief that investors felt, now that it appeared the government would finally address the recession, and of optimism that the reform-minded government of Prime Minister Morihiro Hosokawa would initiate a program of deregulation.

"This is much more significant than a one-time pop," said Geoffrey Barker, chief of research here for Baring Securities. "It is saying that there's a reformist government in power and that it's going to continue in power."

The Hosokawa government has said that it wants to undertake a broad program of economic stimulation and restructuring, by increasing spending on public works and altering the tax system.

It has also said that it intends to shift the balance of economic policy toward consumers and domestic demand, and away from industry and exports.

Yesterday, there were reports that the government would announce within days a program as big as 14 trillion yen -- or slightly more than $140 billion -- of public-works spending projects, land-repurchase programs and income tax cuts. The reports indicated that the tax cuts might be retroactive to January, a move that might quickly lift bleak consumer sentiment.

That could be particularly good news for the United States, which has been pushing Japan for a year to stimulate its economy vigorously as a way of limiting its rapidly growing trade surplus. A stronger economy would be likely to attract more imports, something the United States has been pressing.

Many Japanese are still burdened with huge losses from the four-year-old market slump; the Nikkei index remains down about 50 percent from its peak at the end of 1989.

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