Nikkei at a 19 year low

[Maciamo]

Nikkei closes below 9,000 for first time in 19 yrs.

The Nikkei has gone under 9000, its lowest level since 1983. The TOPIX (average of all stocks quoted in Tokyo, if I don't mistake) is also at its lowest level since 1984.

So, indeed, the economy is declining steadily, but what does it mean ? You can't see it if you walk in Toktyo's streets. People aren't directly poorer for all that. Companies are and risk to go bust more easily. That makes pressures on managers to increase profitability and thus restructurating (i.e. firing some staff), reducing salaries and not paying bonuses. But young girls keep buying Chanel and Prada in Ginza as usual, so you can't really say Japanese are so much poorer than 10 or 15 years ago. Prices are going down at the same time, so even with lower salaries, things remain mainly unchanged for most people. As the yen does devalue, Japanese people maintain their high income standard internationally. What is interesting is that a currency value doesn't necessarily follow the stock exchange. Look at the US after 11 September ; stocks went sharply down while the dollar rose. But the yen is not in a so good position either, though nothing catastophic so far.

[Namashibori]

What does it tell you? The market is not a good indicator of real life situation.

[thomas]

Just two brief burps:

1.) The Japanese government ought to straighten up the rotten bank system (faulty credits etc).

2.) Stock exchange: mere gambling with no productivity behind transactions. Obsolete.

[moyashi]

The news and people were worried that the 10,000 yen mark would mark the end of life over here. Lolo, Like Maciamo said, life hasn't really changed.

Along Thomas's lines. The yen and dollar are really tied tightly together. The Japanese hold so many dollars that if Japan sold off I could create a world recession. I read many years ago that there was talk to creat a Dolyen.

The Postal Savings have a major hole that funnels the people's money directly into the government. hmmm, if this hole would ever be closed and have the missing money returned Japan would be in major trouble.

The big problem makers are Sony and the car industry who make so much money abroad that they try to keep the exchange rate at 150 yen to 1 dollar. While the people would benefit at an exchange rate of anything under 100 yen to the dollar.

The people in general have been burned to many times in the stock market to be interested in playing anymore.

hmmm ... what is going to happen?

[Maciamo]

@banks and postal savings
If there is any major earthquake that force all the people (let's say in the Kanto area) to use a great quantity their savings to rebuilt, Japan will definitely be in trouble. I mean, a major earthquake is one thing, but the main problem would be that banks don't have the money they are supposed to keep. They won't be able to give a tenth back to their owners. So people will eventually realised that the banks and government cheated them and be left alone unable to rebuilt or repair their houses. All the problems Alex Kerr talk about in Dogs and Demons would suddenly resurface and maybe anhililate Japanese economics. That's the worst case scenario I can think of. Let's hope this long feared earthquake doesn't come too soon.

[thomas]

As you said in another thread, Maciamo, as long as a faulty situation can be exploited nothing will change in Japan. At the moment people have the choice between slow or fast economic collapse unless appropriate steps to solve the situation are taken by the government and financial institutions.

Question: are these still consequences of the bubble years or have the banks continued to operate at high risk?

Here's an excerpt taken from Asianinfo.org:

PROBLEMS AHEAD

Japan's prolonged economic troubles have been attributed to its 50-year postwar economic system. The Japanese government is presently taking forthright structural measures to deal with problems stemming from the bursting of the economic bubble and the need for thorough changes in order to accommodate industrial globalization. The government is working to stabilize the nation's financial system and revitalize the country's sluggish economy. After several prominent financial institutions declared bankruptcy in 1997, an implementation of measures began in part in 1998.

Of concern is Japan's growing number of the elderly. As the population of the aged increases in future years, the work force will be reduced. It will mean an increase in social security demands as well as an increase in the tax burden that workers will be expected to carry. It is felt that an undermanned labor force is a possible factor in the reduction of potential growth.

"...working to stabilize the nation's financial system", are they?

[moyashi]

Well, yeah, an earthquake would be the ticket but I live up in Sapporo where one of the major banks went under and caused serious havoc to the economy. The Bank brought down about 5-10 major companies with it. (I think that Takugin Bank was sacraficed by Tokyo on purpose).

But I don't think it's just an earthquake that would do it. All it would take is a run on a bank by it's customers and within hours a serious hurt would force it to merge with another.

The postal savings thing is very scary and most people don't realise how much so.

Well, in 50 years Japan's population of 120 million will be 80 million anyways ... oh well. Japan just needs to hold out for 50 years ;)