the negative view
.....he did not mention tax cuts--if approved will rocket market higher.
curtis
Today March 18 1999
Beware the Japanese bull
Is there finally a bull case for buying Japanese shares? Almost unnoticed alongside the Dow's historic breach of the 10,000 level, the Nikkei has seized the mantle of this year's best performing major stock market index. Since January 1, it has risen by 16 per cent. Compared with that, the Dow has managed just 7½ per cent and the FTSE 100 an anaemic 4½ per cent.
How are investors to read this surge? With considerable caution, if history is any guide. In the bleak years since 1989, foreign investors have periodically dipped into Japan, hoping to bottom-fish. The general result has been to provoke a transient rally - followed by renewed slump. On the surface, there is little sign that things will be any different this time. Japan's wheezing economy has not lost its capacity to surprise on the downside. This month's announcement that the economy contracted in the fourth quarter is a case in point.
One positive factor is the increasing stabilisation of the banking system, mainly due to a huge injection of government funds. The credit drought afflicting Japanese companies has abated, bringing a dramatic decline in bankruptcies. But this good news contains bad tidings for equities. In return for its largesse, the government is forcing banks to unwind their cross shareholdings, which may amount to 30 per cent of the market. Like its forebears, this rally may contain the seeds of its own destruction.
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