Japan’s Stocks Fall on Worries Budget Won’t Boost Economy

Japanese stocks fell today amid concern the government’s new budget fails to provide a needed boost to the economy, which could eventually crimp corporate profit growth.

Bank of Tokyo-Mitsubishi Ltd., Industrial Bank of Japan Ltd. and Nomura Securities Co. were among the biggest decliners.

“Worries the economic recovery may stall are spreading now that the fiscal 1997 budget has been finalized,” said Hiroshi Masuda, deputy general manager at Yamaichi Securities Co. “There’s little hope for large-scale supplemental spending to stimulate the economy.”

The benchmark Nikkei 225 stock average fell as much as 364.24 points, or 1.86%, to 19,185.17. The broader Topix index of all shares on the first section of the Tokyo Stock Exchange lost 12.90 points, or 0.88%, to 1456.53 in late morning trading.

Concern over the negative economic impact of increased taxes and national debt from the fiscal 1997 budget passed by the Cabinet weighed on the market. The average Japanese taxpayer will owe the National Tax Administration Agency about 70,000 yen more next year than in fiscal 1996, the Nihon Keizai said.

What’s more, the debt needed to finance the 1997 budget will exceed 500 trillion yen--roughly equal to Japan’s gross domestic product.

Persistent worry over the health of Japan’s financial industry, which is struggling to deal with trillions of yen in nonperforming loans, also helped trigger the market’s drop. Investors worry debts racked up by real estate financing affiliates will crimp profit growth at major banks and brokers.

Industrial Bank of Japan will close Koei Corp., an unlisted real estate financing affiliate with debts of more than 260 billion yen, the Nihon Keizai newspaper reported. That hurt shares of the IBJ and other banks with bad loans linked to the collapse of a speculative real estate market bubble more than five years ago.