It's Monday morning in Tokyo, and the bourses seem bent on continuing with their long march down. This time the excuse is Sony earnings, but it might as well be SARS, or something else. The thing is people are looking for excuses to respond to, and the interesting question is why? This brings me to a topic dear to my heart, strategic or fundamental uncertainty. Now Brian Arthur , among others, raised the problem of strategic lack of visibility years ago, in the context of the increasing returns environment. Now since 09/11, or since March 2,000, or whenever, it cannot surely have escaped everyone's notice that we have been in an environment characterised by uncertainty. First it was 09/11 itself, then Iraq, now SARS, the only clear thing is that it continues, and seems to attach itself to the next new thing, rather in the way that the 90's was characterised by a euphoria which latched-on to the then 'next new thing'. On this reading the real killer app was the one which finally triggered the uncertainty wave. Remember, on one version of the story, economics is all about expectations, although it is clearly a mistake to imagine that those expectations need to have anything primordially rational at their base: Keynes wasn't simply being naieve when he spoke of 'animal spirits', he'd spent far too long with the Bloomsbury crowd for this to be true (now why hasn't ocurred to some bright young post grad to do a thesis on animal spirits in the work of DH Lawerence: probably because most economists abhor literary-based narrative analysis).
So why do I think we have this 'existential' uncertainty. This is more difficult, and I'm sure each and all of us can offer some reasons of our own. My own 'best bet' is that it has something to do with that 'acceleration principle' and the associated collective feeling of 'jet lag'. I go back to the point, using past time (say the year 1950 for eg) as a measure: how many years will we have between now and 2010: 100, 200, 300.......n? I have no idea. Which means it is impossible for me to talk about what the world might look like come 2010 (except for demographics, of course, demography is a kind of state variable, barring horrendous catastrophies the die is effectively cast here).
Personally I can only manage to bring myself to imagine as far forward as 2005, and that with difficulty. And if I can think this way, I imagine a lot of COE's and Finance Directors in large corporations can have some of the same feelings when it comes to investment decisions. What I am trying to say is that this uncertainty may be more than a passing phenomenon and may survive long after SARS (hopefully) has been brought under control. Obviously eventually we'll adapt: it's what is going to happen between now and that eventuality that is exercising my mind right now.
Japanese stocks slumped on Monday morning as Sony shares plunged almost 15 per cent after a delayed reaction to the company’s weak earnings. The Nikkei average was down 0.6 per cent at 7,652.95 by midday while the Topix index also lost 0.6 per cent to 777.02. No investors had stepped up to buy Sony shares on Friday after the company shocked investors by posting a loss in the last quarter of its financial year and missing its profit target for the full year. On Monday buyers finally emerged, but only at prices that sent Sony shares tumbling Y480 or 14.9 per cent to Y2,740. Sony was the worst performing stock of the morning session. Many of Sony’s electronics peers lost between 4 and 5 per cent of their value on Friday, and were therefore relatively steady. NEC slipped 0.3 per cent to Y348, Toshiba was down 1 per cent at Y311 and Hitachi off 2 per cent at Y385. Matsushita Electric, set to report its full year earnings after the market close, was 0.5 per cent lower at Y877. Bank stocks were lower after the Financial Services agency said on Friday its inspections had found a need for Y1,300bn in loan-loss charges at top banks. UFJ was off 3 per cent at Y86,700, MTFG fell 2.2 per cent to Y356,000, SMFG was down 3 per cent at Y165,000 and Mizuho lost 1.7 per cent to Y59,400.
Fujisawa Pharmaceutical dropped 7.4 per cent to Y1,967 after the drugmaker on Friday forecast operating profit in the current fiscal year would fall 11 per cent due to increased research and development costs. The company posted a record group net profit for the year to March. Medical mask maker Japan Vilene jumped 7.8 per cent to Y402 as fears grew about the spread of SARS in Asia. Japan Vilene shares have leapt from Y215 at the start of April.
Source: Financial Times
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