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Tuesday, September 03, 2002


This would be comic were it not macabre. It feels like someone's trying to make it to the Guinness Book of Records as with every passing day we seem to move one step back in time.

Tokyo shares skidded to a near 19-year low on Tuesday as banks, brokerages and high-tech issues crumbled amid growing concern over the global economy. The Nikkei 225 average fell 304.59 or 3.2 per cent to 9,217.04, its lowest level since November 1983. "The market was approaching fresh lows after falling in drips and drabs, and when it touched a new low it triggered more technical selling," said Tsuguya Onozuka, manager for equities at UFJ Tsubasa Securities.

"The fact that shares have fallen so far with so little news out there underlines how poor sentiment is right now. "Banks led the meltdown amid fears that recent falls in the stock market would result in heavy losses in their equity holdings and erode their already weakened capital base. The banking sector sub-index sank 5 per cent during the day. Mizuho Holdings, the world's largest bank by assets, tumbled 9.2 per cent to Y226,000, Sumitomo Mitsubishi Banking Corporation lost 8 per cent to Y556, and Mitsubishi Financial Group slid 6.9 per cent to Y740,000.
Source: Financial Times

This situation seems to be deteriorating by the day, and one senses that the Japanese government must act fairly soon. This is the easy part to foresee, the real question is what will they do? The most probable would seem to be to drive down the yen again in an attempt to refloat an export lead expansion, but then comes the question, how would the US respond? The point is that when things are only half bad, then sharing the pain seems acceptable, but as things get really bad, then no-one wants to be on the receiving end, but that only makes things worse for everyone. It's called a negative feedback loop I suppose. I'm not a marine engineer, but if I was I'd be asking how much more water all this can take before one of the bulkheads cracks and the water goes cascading on from one tank to the next.

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