Japan stocks bounce back as government relief plan unveiled
Wednesday 19 November 1997
The Nikkei stock average of 225 leading shares closed at 16,726.57, up 443 points or 2.7 per cent. Since the beginning of the week, stocks have risen by more than 10 per cent, despite the collapse on Monday of Hokkaido Takushoku, Japan's tenth biggest bank.
Investors took heart from hints by ministers that, despite their new willingness to let big banks go under, depositors would be protected by the government - a position which appeared to be echoed yesterday by Ryutaro Hashimoto, the Prime Minister.
"As I've said, we want to hold a meeting with this in mind," he replied, in answer to a question about whether public funds would be made available.
Officials of the Ministry of Finance admitted after the collapse of Hokkaido Takushoku that they expected "one or two more banks to go under". Ominously, the Ministry of Finance yesterday began an "inspection" of Hokkaido Bank, a regional bank based, like Hokkaido Takushoku, on Japan's northernmost island. Hokkaido has owned up to about 200bn yen (pounds 940m) in bad loans, generally judged to be an underestimate.
But in the financial world, there is presently little doubt that the government will step in to rescue depositors at stricken banks - if not the institutions themselves. Among the public, however, the use of tax money to save banks which have gone under due to their own bad lending decision is unpopular. In any case, the government has committed itself to cutting public spending in an effort to cut its own debt of more than 500 trillion.
The government's difficulties were underlined yesterday by the announcement of a new policy package of deregulation measures intended to boost the private sector and stimulate stagnant growth. It contained more than 100 individual measures, ranging from the privatisation of KDD, the country's biggest international phone carrier, to government loans for small business, and a change in stock market rules to allow banks and insurance companies to compete with brokerages.
According to the Economic Planning Agency (EPA), the overall effect of the package on the economy will be 60 trillion yen. Previous injections of government cash, some 60 trillion yen worth between 1992 and 1995, have "resulted in the worst and most critical fiscal conditions among the major economies in the world," said the economic planning minister, Koji Omi. "I am fully convinced that this economic policy package will soon push our economy back on a robust growth path led by more vigorous and dynamic economic activities in the private sector.''
But some of the measures outlined will not take effect until 1999, and the concession on which business had been pinning its hopes of short-term relief - tax cuts - was absent from the package, although a review of corporate tax cuts is promised for December. "The question is whether it can serve as a quick fix for the flagging Japanese economy," said Kosaku Inaba, chairman of the Japan Chamber of Commerce and Industry. "I hope the government will formulate an additional package that includes tax cuts," said Shoji Tsuda, president of the Mitsukoshi department store chain, badly hit by the rise last April in the consumption tax.
Elsewhere in Far East markets, the escalating problems in South Korea dominated the day's events. The key KOSPA stock market index plunged as much as 4 per cent after South Korea's parliament rejected financial reform bills, heightening speculation that the government would seek tens of billions of dollars from the International Monetary Fund. The KOSPA index still finished 2.32 per cent down on the day.
In Hong Kong, a three-day rally in share prices was halted as the Hang Seng index fell 174.57 points to 10,245.18. There was further concern about possible interest rate increases. "Hong Kong interbank rates are up slightly, and that's enough to make people nervous," said James Osborn of ING-Baring Securities (HK).
Apple has been hit by complaints about the 1.1GB download
Much-loved cartoon character returns - without Sir David Jason
Liam Neeson's Downton dreams
Matt Smith is set to join cast of the Jane Austen classic - with a twist
Actress to appear in second series of the hugely popular crime drama
Olympic diver has made his modelling debut for Adidas
- 1 Thailand beach murders: Thai PM suggests 'attractive' female tourists cannot expect to be safe wearing bikinis
- 2 Scottish independence: Learn from Quebec's mistakes and beware of promises. Vote Yes.
- 3 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 4 Revealed after 75 years of secrecy: 'Fifi' the glamorous WW2 special agent who tested British spies' resolve
- 5 Have you heard about the film Singapore has banned its people from watching? Well, you have now
Thailand beach murders: Thai PM suggests 'attractive' female tourists cannot expect to be safe wearing bikinis
Scottish independence: Final opinion polls show undecided voters could swing result either way
Scottish independence: Almost half of No voters have felt 'personally threatened' by the Yes campaign
Isis release 'Flames of War' video warning Obama of attacks troops could face in Iraq
Hitler’s former food taster reveals the horrors of the Wolf’s Lair
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Scottish independence referendum: A nation divided against itself
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Portuguese academic says British are 'filthy, violent and drunk'
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
iJobs Money & Business
£70-90,000: Saxton Leigh: Our client a London Market Insurer are seeking a Pro...
£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...
£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...