What goes down will hopefully go up eventually ... such is the state of Japanese leadership ... I am hoping something got lost in the translation and the Finance Minister didn;t exactly mean what he supposedly said.
quote.bloomberg.com
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Economies
08/29 05:49
Shiokawa Hopes Japan's Nikkei Can Defy Gravity and Start Rising
By Peter Vercoe, with reporting by Tomoko Yamazaki, Daisuke Takato and Yoshiko Matsushita
Tokyo, Aug. 29 (Bloomberg) -- Japanese Finance Minister Masajuro Shiokawa wants to defy the laws of gravity, hoping that what goes down must come up.
Asked what he thought of today's 1.9 percent slide in the main Nikkei 225 stock index to below 11,000 for the first time in 17 years, the 79-year old finance minister said: ``I don't understand why it's falling so much. The only thing I can do is believe that something that falls will eventually start rising.''
That's not good enough for investors, who want the finance chief of the world's second-biggest economy to arrest an 18-month skid that's lopped 46 percent off the index. Solutions first proposed early this year, such as cutting capital gains taxes on stocks and setting up a government-backed body to buy stocks from banks, are still being debated by government officials.
``As finance minister he should not hope, but do something effective to solve Japan's problems,'' said Chua Soon Hock, chief executive at Asia Genesis Asset Management Pte. in Singapore, who's been investing in Japan for 18 years. ``That's his job.''
Other policy makers were also at a loss for answers on how to stem the Nikkei's decline. ``It's serious,'' said Taro Aso, the LDP's chief policy maker. ``There's no question it will have negative effects on the economy.''
The most likely response is extra government spending. Shiokawa said the ``right conditions exist to compile an extra budget.'' That would mean more of the same for investors -- 10 spending packages in the past eight years, worth 130 trillion yen ($1.1 trillion), have failed to halt Japan's economic slump.
No Quick Fix
The Nikkei's decline was led by banks such as Mizuho Holdings Inc., which dropped after Financial Services Minister Hakuo Yanagisawa said the government expects it will take lenders seven years to reduce bad loans by 60 percent, longer than earlier expected.
``The government is just delaying the problem of banks' bad loans longer and longer,'' said Makoto Suzuki, who helps manage $125 million in Japanese equities at Chuo Mitsui Asset Management Co.
Bank of Japan Governor Masaru Hayami also urged the government to do more to fix the economy. Even though the central bank has pared interest rates to zero and expanded the supply of money, banks aren't lending as they try to clear bad loans, Hayami said.
``Under these circumstances, there is a limit to what monetary policy can achieve,'' he said. ``Monetary policy can become effective only if the government promotes its structural reforms.''
Analysts said investors shouldn't hope for a quick fix.
``Things aren't going to be resolved overnight,'' said Grace Chen, Asia economist at Royal Bank of Scotland in London. ``There's lots of wheels that have to work together.''
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