***OT***Sometimes you wonder if it pays to be in stocks. The Japanese stock market is now retesting lows set in 1986.
But with a yield of 0.765 percent for 10-year Japanese govt bonds, makes you wonder why anyone would buy them.
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foxnews.com
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Tokyo stocks nosedive when government skips market
boost
5.11 a.m. ET (912 GMT) September 30, 1998
TOKYO (AP) — The Tokyo Stock Exchange's main index plummeted 3
percent to its lowest level in 12 years today when an expected injection of public
funds to shore up the market failed to materialize.
The dollar gained against the yen.
The benchmark 225-issue Nikkei Stock Average dropped 415.04 points, closing
at 13,406.39, the lowest finish since 13,394.31 on Feb. 21, 1986.
On Tuesday, the Nikkei index had slipped 87.94 points, or 0.63 percent.
The market opened higher on hopes that the government, via public fund buying,
would push share prices higher to help the balance sheets of companies as they
close their books for the fiscal half on today.
But when the public fund buying didn't materialize, prices dropped sharply in the
last 30 minutes of trading.
"Players had been expecting that public fund buying would support the market,
but when that didn't happen they had to cut their losses,'' said Hideyuki Okoshi, a
manager at Chuo Securities.
"Everybody panicked,'' said Louis Tseng, head of derivatives at Jardine Fleming
Securities. He said the market remained vulnerable to a further drop.
Since the close of the latest fiscal year on March 31, the benchmark average has
fallen 19 percent. The market gauge finished last fiscal year at 16,527.17 and
ended the 1997 trading year at 15,258.22.
Also weighing on the market was the announcement that Moody's Investors
Service had cut the debt rating of Nomura Securities Co., Japan's top brokerage
and one of the world's largest.
The move was the latest in a series of rating downgrades for Japanese
companies. Moody's cut Nomura's long and short term debt ratings and its Bank
Financial Strength Rating.
The rating agency cited losses in Nomura's international operations and its
domestic troubles in the midst of Japan's worst recession since the end of World
War II.
The broader Tokyo Stock Price Index of all issues listed on the first section was
also down 19.33 points, or 1.82 percent, to 1,043.57. It had fallen 0.62 points,
or 0.06 percent, the previous day.
The drop in stock prices quickly eclipsed any buoying effect from a U.S. interest
rate cut Tuesday, which had been expected to boost markets by cushioning the
U.S. economy from global economic turmoil and revive other slumping
economies.
On Tuesday, the U.S. Federal Reserve lowered the benchmark federal funds rate
to 5.25 percent from 5.50 percent a move widely expected after Fed Chairman
Alan Greenspan hinted at it recently.
But the Fed action was seen as largely insufficient, eventually sending U.S. stocks
and then the dollar lower. Lower interest rates tend to make a nation's currency
less attractive to investors.
The dollar recovered in Tokyo trading today, however, hitting 135.72 yen at 5
p.m. (4 a.m. EDT), up 1.30 yen from late Tuesday in Tokyo and also above its
late New York rate of 134.45 yen overnight.
On Wall Street Tuesday, the Dow Jones industrial average, which was up 15
points as Fed officials concluded their meeting, dropped 28.32 points or 0.3
percent closing at 8,080.52.
The yield on the benchmark No. 203 10-year Japanese government bond fell
today to 0.765 percent from Tuesday's finish of 0.805 percent, driving its price
up to 109.35 yen from 108.96 yen.
The government changed the benchmark bond from No. 182 because of the
increased trading volume of No. 203.
© 1998 Associated Press.
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