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To: Ron Wilkinson who wrote (20201)	10/1/1998 8:15:00 AM
From: Luc Beaugrand	Read Replies (1) \| Respond to of 116768

$302.00 for Dec cbs.marketwatch.com

To: Ron Wilkinson who wrote (20201)	10/1/1998 8:38:00 AM
From: Alex	Read Replies (1) \| Respond to of 116768

Japan Slowly, Slowly Slips Into the Abyss Market value of bank holdings of equity now less than book value The Japanese economy, the world's second largest, appears to be on the brink of depression. A flurry of dreadful economic data yesterday revealed a further collapse in household income, retail sales, housing starts and industrial production. This portrait of an economy already in recession and rapidly decelerating helped drive the benchmark Nikkei 225 index of stock down 3 per cent to a 12-year low at 13,597, on a day when Japan's corporate sector closed its books for the first six months of the fiscal year. The market was further undermined by the surprise decision by Moody's, the US ratings agency, to downgrade the debt of Nomura, the biggest and most powerful of the Japanese brokers. Many companies which value their equity portfolios at market rates will have to record accounting losses on their holdings, warned analysts. Banks will also suffer huge paper losses. "The losses on equities will be very significant for groups such as the trading companies and steel companies which have large portfolios," warns Kathy Mitsui, strategist at Goldman Sachs in Tokyo. "Some will have to book huge losses that could wipe out their entire operating profits." At yesterday's Nikkei level the market value of portfolios held by the top 19 banks was some ¥4,600bn (£20bn) below their book value, said Yoshinobu Yamada, an analyst at Merrill Lynch. "At these levels only Bank of Tokyo Mitsubishi is recording a profit," he says. Today, the Bank of Japan's "Tankan" survey is published, and is expected to show a further sharp deterioration of business sentiment. Yesterday's data underlined the impression that the economy was entering a downward spiral. Production cuts are leading to lower overtime and take-home pay, which is undermining retail sales, causing higher inventories and forcing further reductions in output. Consumer confidence continued to crumple. Manufacturing sector overtime collapsed an annual 16.5 per cent in August, while average pay declined 4.8 per cent, the biggest fall since January 1971 when the Labour Ministry began collecting statistics. The fall in take-home pay hit retail sales, which in department stores during the month dropped 4.3 per cent year on year. Housing starts dropped 11.4 per cent year on year. Industrial output dropped 8.5 per cent year on year, the 10th consecutive month that production has fallen. Inventories fell 0.5 per cent from July, but the Ministry of International Trade and Industry warned they remained at a high level. The government was yesterday reported to be considering increasing the scale of tax cuts and providing additional spending in a supplementary budget. However, analysts pointed out that many local governments were already so indebted that they could not afford to spend more. Public sector construction orders fell year on year by 14.7 per cent in August. Bureaucrats believe most tax cuts would be saved by anxious consumers. The Financial Times, October 1, 1998