[IWAR] JAPAN equity outlook

From: Michael Wilson (MWILSON/0005514706at_private)
Date: Mon Jan 05 1998 - 10:18:24 PST

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                          Japan stocks brace for further knocks
          Copyright ) 1998 Nando.net
          Copyright ) 1998 Reuters
       TOKYO (January 4, 1998 4:00 p.m. EST http://www.nando.net) - After a
       series of crises ranging from accelerating corporate bankruptcies to
       Asian financial turmoil in 1997, Japan's stock market faces more stormy
       trading in the new year, brokers say.
       Last Tuesday, the Tokyo stock market finished 1997 at the lowest
       year-end level in 12 years.
       The Nikkei average closed at 15,258.74, down more than 4,000 points from
       the start of last year.
       The market's barometer Nikkei 225 average is expected to fall to 14,000,
       or even lower, due to prolonged stagnation in the Japanese economy, a
       possible credit crunch, and worries about more bankruptcies.
       "We expect the downside limit of the Nikkei average between January and
       March to be 14,000, but there is a 30 percent possibility that a
       downward spiral could send the Nikkei below that line," said Hiroyuki
       Nakai, chief investment strategist at Nikko Securities Co Ltd.
       "In that case, we can't see where the end of the spiral would be," he
       In a Reuters survey released on Dec. 26, nine out of 12 domestic
       financial institutions said the Nikkei average would dip to 14,000 at
       some stage in January.
       "The market is worried about how many more firms will collapse in the
       beginning of the year," said Seiki Orimi, an analyst at Dai-Ichi
       Securities Co Ltd.
       Analysts say the recent tight lending by Japanese banks, which have
       suffered from Asia's financial turmoil and a reduction of domestic
       deposits, may accelerate business failures.
       Investors have been haunted by a collapse of foodstuffs trading house
       Toshoku Ltd in December.
       "Toshoku's collapse was caused by bank credit tightening," one trader
       said. "The same thing could happen to any company."
       Corporate fund-raising demands heighten in March, when most Japanese
       firms close their books.
       "Shares in companies whose credit risks seem high will be hit hard
       intermittently," said Hiroshi Arano, a strategist at Dai-Ichi Kangyo
       Asahi Asset Management.
       "To pull the stock market out of the doldrums, the government has to
       draw up measures that would have a sustainable impact on the country's
       economy," he said.
       Japan's nascent economic recovery completely stalled in 1997, following
       a much-criticised hike in Japan's consumption tax by two percentage
       points to five percent.
       The staggering of the economy, as a result of the government's
       overestimate of growth, was followed by a string of collapses of
       Japanese financial firms.
       They included Yamaichi Securities Co Ltd, one of the so-called "Big
       Four" brokerages, and second-tier Sanyo Securities Co Ltd.
       In early 1997, Nissan Mutual Life went under, marking the first failure
       of a life insurance firm in Japan's post-war history. Hokkaido Takushoku
       Bank Ltd became the first failure among major commercial banks.
       The banking sector was also chilled by the financial crisis in other
       Asian countries, since Japanese banks have substantial amount of loans
       in the region.
       Also battered in 1997 were Japan's major brokerages due to the
       revelation of illegal corporate racketeer payoffs.
       Penalties against Daiwa Securities Co Ltd and Nikko Securities Co Ltd
       took effect on Dec. 25, Daiwa will suspend stock trading on its own
       account until April 24 while Nikko will suspend trade until March 4.
       Heavier penalties imposed on Nomura Securities Co Ltd, the biggest among
       the "Big Four," ended on December 31.
       By HIROKO NAKATA, Reuters

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