Analysts believed a stronger yen and a weakening stock market would cost high to the world’s second largest economy.  | A man looks at a stock quotation board outside a brokerage in Tokyo October 28, 2008. The Nikkei average climbed 6.4 percent on Tuesday, as exporters such as Honda Motor jumped on a softer yen, but trade was volatile with the benchmark briefly breaking below 7,000 for the first time in 26 years.(Xinhua/Reuters Photo)
| Tokyo stocks renewed their plunge on Monday, with the key Nikkei index falling 6 percent to a fresh 26-year low at 7,162.97.It fell below the 7,000 mark mid-morning on Tuesday but finally ended sharply higher when it closed on Tuesday.
However, Nikkei was already 60 percent lower from its peak a year ago. The most direct loss-bearers were investors. According to statistics from World Federation of Exchanges, the per capita loss in stock market of Japanese nationals were more than 2 million yen in the past 12 months.
The market plunges also had a stern impact on people who buy no stocks. According to Daiwa Institute of Research, a leading investment research agency in Japan, the 300 major pension funds management firms had an accumulated loss of 5.7 trillion yen. This could make companies hard to increase pension payments for retired employees, who account for a considerable part of population in Japan.
In addition, the shrinking stock assets of banks and enterprises would lead to more cautious decisions on employment and raising remunerations.
The downsizing of financial assets would dampen consumption. The latest release by research firm Hakuhodo said Japanese nationals’ will to consume has dropped 1.9 percent year on year in October, marking a consecutive 6-month decline. Hakuhodo said the reason is due to the fact that family spending was constrained by stagnated income.
WORSENING EXPORTS
The yen was up against most major currencies including the U.S. dollar, surging as much as 10 percent against the dollar last week alone. On Friday, it briefly hit a 13-year high of 90.87 yen to the dollar, though it was traded late Monday around 92.5 yen.
The higher yen has worsened the already darkening outlook of the nation’s export-driven economy, hurting companies like Toyota and Sony by making Japanese good more expensive abroad and reducing the value of overseas profits when converted into yen.
According to Nikkei’s statistics, as of Oct. 24, 375 out of the1,840 listed companies have cut performance outlook for fiscal 2008. In other words, one in five companies suffered slowdown in sales.
One of the most highlighted decrease was reported by Sony. It said on Oct. 23 the sales revenue in 2008 is expected to fall by 58 percent. The news had direct link to the more than 800 points plunge in stock market on Oct. 24.
Among other renowned exporters, NEC and Mitsubishi Motors cut net revenue by 34 percent and 42 percent respectively. Honda’s profit decreased by 40 percent, and Canon was expected to see sales revenue falling by 23 percent.
The worsening sales performances would make smaller and medium-sized companies more difficult to get loans as banks became more cautious about their ability to make profits.
STIFF CHALLENGES
Propelled by strong exports, Japanese economy has resumed to the track of growth since 2002. Exports contributed to more than 60 percent of Japan’s growth, while domestic consumption has remained at a relatively low level. If export keeps worsening, Japan’s economic mode will face stiff challenges.
The fall in stock market and the appreciation of yen have drawn attention from the newly-elected Prime Minister Taro Aso and his government. Aso has delayed general election and focused on measures to deal with the financial crisis and stabilize the stock market.
One of the measures announced Tuesday was that Japan would start banning a type of stock short selling, effective Tuesday, ahead of the originally scheduled Nov. 4, to help calm domestic stock markets.
Some analysts said when Japan can shake off the financial turmoil is totally dependent on the United States as it is still an export-oriented economy.
However, the real problem with Japanese economy is that when the exterior economic climate is beyond control, it is difficult to boost domestic consumption. But with the graying and decreasing of Japan’s population as well as the government’s deficit, there remains a big question mark on whether the nation can find a cure for domestic consumption. VietNamNet/Xinhuanet |