Tokyo Stocks Rise Despite the Yen’s Continued Decline
Prices on the Tokyo Stock Exchange Monday defied a continuing drop in the yen’s value and rose in morning trading today.
The Nikkei average opened 198.91 points higher, at 30,570.9, and rose above the 31,000-yen mark for the first time in three days before closing for the morning at 30,870.84, a gain of 498.68 points.
The yen, however, continued its downward slide, with the dollar opening at 155.65 yen and climbing to 156.30, a gain of 1.23 from Friday and the highest in three years and two months.
Exchange dealers blamed a vague statement issued in Los Angeles Friday by Treasury Secretary Nicholas Brady and Finance Minister Ryutaro Hashimoto for the yen’s continuing plunge. The statement merely reconfirmed a commitment of the world’s two largest economic giants to economic policy coordination, “including cooperation in exchange markets.”
In a TV interview Sunday, Brady reinforced a feeling that the United States was uninterested in helping support the yen by declaring that the dollar has “seemed relatively stable in the past two years.” He also said that plunging Tokyo stock prices had not affected American or European markets so far.
The Bank of Japan reportedly intervened again by selling more than $500 million in an attempt to prop up the sagging yen.
Tadashi Arai, a director of Nippon Kangyo-Kakumaru Securities Co., said the stock market had already “digested a possible further weakening of the yen.” Japan’s economy, he added, should remain “relatively unscathed” even if the yen falls to 160 to the dollar.
Zenshiro Mizuno, a Marusan Securities director, predicted that stocks would remain steady, saying the market appeared to have hit bottom Thursday when the Nikkei average fell as low as 28,830 before closing slightly higher for the day. Analysts also said buying picked up in anticipation of operations for the new fiscal year. Stocks purchased Tuesday or later will be delivered after the start of fiscal 1990 on April 1.
The yen’s decline, however, marked the second time in a week that the market showed itself unimpressed with Japanese government attempts to halt the currency’s decline.
Last Tuesday, when the Bank of Japan raised its central discount rate by 1%, both the exchange and stock markets reacted with yet another plunge of near-historic scope in the first trading day Thursday after a national holiday Wednesday.
Tokyo stocks rebounded Friday to close above the key 30,000-point level, ending a dismal week on an up note--a factor that was cited in helping produce today’s early gains. The key 225-share Nikkei index Friday jumped 528.82 points or 1.77% to 30,372.16 after nose-diving 963.85 Thursday, when the 3% loss carried the average to a new low for the year.
The Brady-Hashimoto Los Angeles declaration was found lacking because of its failure to go beyond earlier U.S.-Japan statements and communiques of the Group of Seven leading financial powers. Indeed, it did not even mention “market stability.”
The failure of Brady and Hashimoto to reach any agreement about the U.S. demand that Japan bolster its spending on public works to use up some of its excessive savings and thus promote imports, also pushed the market down, analysts said. The U.S. demand was made as part of the Structural Impediments Initiative talks that President George Bush described as crucial to Prime Minister Toshiki Kaifu in a Palms Springs summit in early March.
The United States is seeking more than 200 reforms in six categories in the talks, an interim report for which is to be issued by mid-April.
The two finance chiefs merely “reaffirmed their commitment to economic policy coordination, including cooperation in the exchange markets.”
In testimony in the upper house of Parliament today, however, Prime Minister Toshiki Kaifu indicated for the first time that he may be willing to accept another major American demand for structural reform by abolishing a law restricting establishment of supermarkets and department stores.
“Although we must consider order in the distribution system, the relaxation of government regulations has become a major trend in the world today,” Kaifu said. Citing an interim report to be issued for the structural talks in early April, he said that “When the time comes, I think I must make an appropriate decision.”
