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To: goldsnow who wrote (14035)	7/1/1998 9:32:00 PM
From: goldsnow	Respond to of 116877

Japan market to walk on tightrope by end of '98 10:44 a.m. Jun 30, 1998 Eastern By Hiroko Nakata TOKYO (Reuters) - Amid banks' mounting bad loans and economic recession, the Japanese stock market faces a series of hurdles before it can pull out of an eight-year slump, strategists and investors said. In a Reuters poll, they forecast the Nikkei 225 average would climb to 17,000 points at the end of this year and 19,000 at the end of 1999 from a close at 15,123.2 on June 24, the second and final day the poll was taken. The figures are the median of 11 forecasts made for both periods. But they said that if the government makes even one major mistake, it could send the market into a tailspin again. ''So right now, whether we're at 14,500 in six months or at 17,000-18,000 in six months is almost entirely depending upon how quickly the government can act and how credible those actions are,'' said Darrel Whitten, strategist at ABN AMRO Securities (Japan) Ltd. ''It's pretty tight balancing to go through. One big mistake, and we're going to have the worst scenario,'' Whitten said. ''There is not a lot of room for a mistake right now.'' The Nikkei 225 average has mostly hovered above the psychologically significant 15,000 level. Brokers said the surprising joint action by Japan and the United States to halt the yen's slide earlier in June sparked hopes that Japan would act swiftly to fix the financial system and revive the flagging economy. Due to the intervention and the following emergency meeting by G7 nations and the Pacific region in Tokyo, the probability of Nikkei 225's tumble has dropped steeply to 20 percent to 30 percent from 50 percent, Whitten said. ''But there is still a possibility that countermeasures will take too long, or there is some sort of a snag. And in that situation, stocks still could drop to 14,500, and 12,500 or 12,000,'' he said. Shigeru Shiraishi, chief investment officer at SG Yamaichi Asset Management Co. Ltd., said: ''There are three hurdles that the stock market has to clear now, and it has to do so quite successfully.'' The hurdles are Japan's recovery from its economic recession, stability in the financial sector, and reforms in corporate governance, Shiraishi said. A failure to achieve one of the goals may push the Nikkei average to 14,000. But if the market expects about 10 percent growth in corporate earnings for the latter half of 1998-99 and sees brighter signs in economic indicators, the Nikkei could briefly climb 18,000 in October or November. Pelham Smithers, strategist at ING Baring Securities (Japan), said the enactment of the government's 16 trillion yen ($115 billion) stimulus package will provide a near-term boost for both the economy and the stock market. ''The combination of the benefits from the fiscal stimulus package and the likelihood of Japan putting in motion a bailout of the banking sector will remove two big negative factors for the market. They will help pull Japan away from recession.'' But he added, the benefits of a bank bailout will take longer to work their way through the economy. SG Yamaichi's Shiraishi said: ''What is dragging down Japan's economic growth is weak consumer power, and a permanent tax cut is essential to support it.'' He also said that, in order to rescue the financial sector, the government needs to activate land transactions and to resolve a credit crunch by using public funds. Some investors were a bit skeptical about Prime Minister Ryutaro Hashimoto's initiative. ''Hashimoto will eventually need to solve the problems of the financial sector, but the pace and the scale of reforms all depend on Hashimoto's initiative,'' said Ritsu Matsushita, director at Invesco Asset Management (Japan) Ltd. The Japanese poll was one of a series of surveys forecasting the outlook for 21 leading stock indices worldwide. Copyright 1998 Reuters Limited.