TOKYO MARKET; Investors fear the worst

Japanese stocks may fall this week as ugly GDP figures, cuts in earnings forecasts and likely weakness in global markets all threaten to pull the benchmark Nikkei to 12-year lows. Bonds are likely to rise as investors could seek fixed-income securities as a haven .

Toshiba, the world's biggest maker of notebook PCs, and Komatsu, Japan's largest maker of construction equipment, may pace an across-the-board fall. "Japan is at the epicentre of a global earthquake," said Scott McGlashan, director and head of Far Eastern investment at Perpetual. "Terrible GDP, major revisions down to corporate earnings and a continuing impasse on bank rescue would drive the market to new lows, even if the rest of the world looked hunky-dory."

The benchmark Nikkei Stock Average fell 0.9 per cent to 13,916.98 last week, only the second time in 12 years it has fallen below 14,000. It will probably trade between 13,500 and 14,500 next week, said Kiyoshi Tsugawa, chairman of Lehman Brothers Japan. The benchmark government bond yield fell 29 basis points to 0.78 percent.

Japan's economy shrank for a record third-straight quarter, contracting 0.8 per cent in April-June from the previous quarter and 3.3 per cent on an annualised basis, as Japan dug its heels into its worst recession in more than 50 years.

"I don't think the government is aware the economy is contracting as violently as it is; it's screaming for domestic restructuring," said Andrew Aiken at Credit Suisse First Boston. "There's a good chance that the market does trade significantly lower on the back of this."

The market may also suffer if companies sell off cross-shareholdings in preparation for the end of the fiscal half-year on 30 September.

If the parliamentary gridlock between the ruling Liberal Democratic Party and the opposition parties on key financial legislation shows no signs of breakthrough, banks will fall further. Yet bonds could be hurt if the LDP and opposition parties reach a compromise.

Wall Street's moves could influence Tokyo as well, especially top exporters and hi-tech issues. "The big unknown from here on is whether or not Wall Street can stop sliding," said Pelham Smithers at ING Baring Securities.

"What can we buy in our country [Japan]?" said Hideo Takemura, a general manager at Partners Asset Management. "The only option to pick is bonds, given global deflation."

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

MBDA UK Ltd: Indirect Procurement Category Manager

Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

Day In a Page

Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Why the league system no longer measures up

League system no longer measures up

Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
Valentine's Day cards: 5 best online card shops

Don't leave it to the petrol station: The best online card shops for Valentine's Day

Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
Diego Costa: Devil in blue who upsets defences is a reminder of what Liverpool have lost

Devil in blue Costa is a reminder of what Liverpool have lost

The Reds are desperately missing Luis Suarez, says Ian Herbert
Ashley Giles: 'I'll watch England – but not as a fan'

Ashley Giles: 'I'll watch England – but not as a fan'

Former one-day coach says he will ‘observe’ their World Cup games – but ‘won’t be jumping up and down’
Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness