Nikkei Hits 20-Year Low as Yen Strengthens

Reviewed By Hitoshi URABE

Article:
"Nikkei Hits 20-Year Low as Yen Strengthens"
http://www.nytimes.com/2003/03/11/business/worldbusiness/11YEN.html
(By Ken Belson) The New York Times

Related Article:
"Japan Legislators Seek Ways to Prop Up Falling Stock Prices"
http://www.nytimes.com/2003/03/12/business/worldbusiness/12CND-JAPA.html
(By Ken Belson) The New York Times

Comments:

It used to be that Japan's securities market was one typical of any underdeveloped country. Liquidity was scarce, not necessarily because there were fewer public companies, but a large chunk of stocks of public companies were locked in the vaults of other companies, making the volume of tradable securities in the market very small. This was good, for financial regulators and brokerage houses as the stock prices would be under their will and command. In fact, stock price maneuvering was considered as a means to control economy, as well as making it convenient for those greedy and having political clout to make money out of. As the economy evolved, however, the market transformed accordingly. It became more transparent and competitive as more players came in, thence becoming less controllable by the regulators, as if it had began to have minds of its own.

It is perhaps unsuitable to talk of a person's abilities based on age. However, for the Finance Minister Mr Shiokawa, he acts as though he has not realized that the market has changed significantly from what he learned of it when he was younger.

Mr Shiokawa has from time to time expressed his discomfort toward the behaviors of the market with assumedly pretended naivety. Every so often when the market behaves against his liking, his would denounce it to be in an "abnormal state" and he senses "malicious intents" of certain players.

Last year, responding to the similar circumstances, the authorities banned short selling. It had a significant effect on reviving stock prices toward the end of fiscal, March 31, and so almost everyone praised the government's determination to act swiftly and effectively. Forgotten, however, was that the effect was realized at the cost of depriving legitimate investors of their market tools, and thus losing faith of the participants who may eventually leave the market out of disgust.

As the article dubs it the "now-familiar cycle", it seems everyone is again craving for something to be done about the falling stock prices. Quite a number of ideas have been floated by both the government and industry, many are apparently being discussed seriously by the authorities, and there may still be more suggestions coming out from various sectors, all with the intention to window dress the financial statements at the end of fiscal on March 31.

The Related Article introduced above is a follow up by the same writer with the focus on the effects on banking sector and its reform scheme. It is quite possible that other concerns would be brought in for consideration to shelter the effects of the low stock prices, and they could come up with some very innovative, if not strange, plans during the next few days.