Tokyo stock market rises 6 per cent in mini-recovery
Saturday 17 January 1998
Japan's ruling Liberal Democratic Party (LDP) ended its annual convention yesterday with its leaders firmly focused on the need for measures to inject new life in the economy.
Newspaper reports suggested that this would be translated into a new package of stimulus measures to be enacted in a special March budget. The measures are reported to include further income tax cuts and increased spending on public works. It appears that the government will focus more on reflation of the economy than on its previous concern with balancing the budget.
The LDP issued a statement saying: "In line with the determination expressed by Prime Minister Ryutaro Hashimoto that Japan will never trigger a global economic recession, we will continue to promptly carry out all possible measures to stabilise the financial system and achieve economic recovery."
The convention also applauded a suggestion that Japanese corporations should be allowed to undertake a mass revaluation of their land holdings, something which has not been done for over two decades. The object would be to provide increased collateral against which banks could either lend more or adjust their existing loans without having to lower borrowing limits.
Although this proposal appears to be very much in the spirit of shuffling the deck chairs on the deck of the Titanic, its ingenuity caught the imagination of investors who are preoccupied by fears of massive corporate defaults on loans.
Interestingly, there were signs that foreign buyers had re-entered the Japanese market with enthusiasm yesterday after a period when they had been notable by their absence. News of foreign buying, enhanced by a steadily improvement in the value of the yen, encouraged domestic investors to come in behind the overseas investors.
While bank shares rose strongly yesterday, Moody's, the US-based credit- rating agency, injected a mood of caution into the industrial sector by issuing a downgrade on the debt rating of the giant Mitsubishi Motors Corp.
Meanwhile, four former executives of Dai-Ichi Kangyo Bank pleaded guilty to illegally giving money to a corporate racketeer as they admitted they had paid him off to ensure that the bank's shareholder meetings proceeded smoothly. The executives are charged with funnelling 11.78bn yen (pounds 55.6m) in 52 payments to Ryuichi Koike from July 1994, to September 1995, through a corporate affiliate.
It looks very much as though 2015 will be a good year for the world economy, after all – and, if it is, that will be thanks to the fall in the oil price. It won't be good for everyone and we have already seen the pressure it puts on the Russian leadership – though, before you conclude that sometimes there is natural justice in the world, remember that the people who are hurt are not leaders such as Vladimir Putin. Other oil- and gas-exporting countries are damaged, too, and I think we will see further fallout in unpredictable ways. But the net impact is strongly positive, more so than most commentators at present acknowledge. The winners far outnumber the losers.
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