Japan’s stock market ends worst year in trading history

December 30th, 2008 - 6:21 pm ICT by IANS  

Tokyo, Dec 30 (DPA) For Tokyo’s traders, it was the worst year on record for Asia’s leading stock market - dragged down by the global financial crisis and the yen strengthening against the dollar. The benchmark Nikkei 225 Industrial Average index lost 42 percent in 2008.”It was an unprecedented year, in which we were hit by harsh headwinds,” Atsushi Saito, the head of Japan’s stock exchange, said Tuesday as the market was winding down for the year.

While almost all 33 market sectors lost ground in 2008, Japan still fared best among the world’s 10 leading markets. What is more, for the second half of 2009, some optimists in Tokyo already see a light at the end of the tunnel.

The US markets’ collapse, triggered by the bankruptcy of investment bank Lehman Brothers, put a sharp end to the longest growth phase in post-war Japan’s history. The nation joined the US and Europe in recession.

Panic selling followed Lehman’s collapse and on Oct 28, the Nikkei fell below the 7,000-point threshold for the first time in 26 years, after having started into 2008 above the 14,000 mark.

Banks subsequently cut down on credit approvals, leading to the largest wave of bankruptcies since the end of World War II, with 33 listed companies going under.

Even Toyota Motor Corp, Japan’s corporate star, was hit hard and predicted an operative loss for the business year through March 31, a first in the company’s 70-year history.

The suffering of the world’s second largest economy after the US, which is highly dependent on export earnings, is made worse by a strong yen, which shot to a 13-year high against the dollar.

Exports dropped in November, with sales to Asia falling to a 20-year low. Industrial production shrunk an unprecedented 8.1 percent. At the same time, Japan’s core inflation rate fell to 1.0 percent, raising the spectre of deflation.

This gloomy environment caused many companies to shed jobs, a further drag on private consumption.

But some analysts are still hopeful for 2009. “The real economy is on a downward trend, but shares will likely be firm,” Yukio Takahashi of Shinko Securities told Japanese news agency Kyodo.

Some analysts predict the Nikkei to move between 6,500 and 12,000 points in 2009. Takahashi expects a rise in shares in the third and fourth quarters, with the financial crisis finally abating, investors getting over the expected bad economic data, and the global stimulus packages taking effect.

Japan’s government, led by Prime Minister Taro Aso, who’s approval ratings have plummeted in the last few months, vowed to fight the crisis with a record 88.5-trillion-yen ($974-billion) budget.

The global downturn was likely to abate by mid-2009, analysts said, putting their hope in the stimulus measures across the globe and rate cuts by central banks.

Driven up by this small hope, the Nikkei ended the year up 1.28 percent at 8,859.56.

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