Tokyo Stocks Keep Falling : Slide Prompts Calls for Government Action to Avoid Panic
Even as the Tokyo stock market opened slightly higher today after Monday’s plunge, there were persistent fears about the limping economy, and traders predicted that share prices have yet to hit bottom.
In trading at midday, the Nikkei stock average rose 66.94 points to 15,133.28. On Monday, it hit a six-year low, crashing through the psychologically important barrier of 15,000 points before slightly rebounding to 15,066.34 points, down 451.93 points or 2.91%.
The market’s latest slide renewed cries from business leaders for strong government action to avert a full-blown financial panic.
But analysts predicted that the market would dive as low as 13,000 points in the face of growing pessimism about soon-to-be released reports on corporate performance, a large volume of bad bank debt and the government’s failure last week to announce clear stimulative measures as expected.
Leading the slide were shares of Nippon Telegraph & Telephone, whose price fell to the lowest level since the former public entity went private.
“Falling stock prices may cause a financial panic if they are left untouched,” Takeshi Nagano, president of the Japan Federation of Employers’ Assn. (Nikkeiren), told Japanese reporters.
He urged the government to boost housing construction and push through $24 billion in income and investment tax cuts. Other business leaders urged government pressure on institutional investors--such as insurance companies that fall under the administrative jurisdiction of the Finance Ministry--to actively buy equities.
Members of the ruling Liberal Democratic Party and business community have also been urging the government to set up an official fund to absorb shares, but Finance Ministry officials have not been enthusiastic about the risk to public resources. Officials are also wary that excessive pump-priming measures might inflate another bubble economy.
“There is only bad news on the horizon,” said a trader at James Capel & Co. “Traders feel we’ve run out of incentives for this market. It’s the usual story of fear and greed, and at this moment fear is outstripping greed.”
He and others said Monday’s slide, which began last week, is the result of several factors. First, Prime Minister Kiichi Miyazawa had indicated that he would announce in August the figures for new public-works spending, expected in the range of $47 billion to $62 billion.
But last Friday, Finance Minister Tsutomu Hata said that there was still no agreement. With Miyazawa and other top officials on vacation now, “no rabbits will be pulled out of the hat, and this market can (fall apart) while they’re on holiday,” a trader said.
The run on NTT stock began last week and accelerated after Tuesday, when foreigners failed to buy shares even after being allowed to register and buy them in their name for the first time.
In addition, many investors had used the NTT stocks as collateral to buy more speculative stocks, such as those related to AIDS and cancer research. When the NTT share prices fell, investors ended up having to dump many of the speculative stocks as well, driving down the overall market.
