JIN-485 -- The shares keep tumbling and the fire sales continue

J@pan Inc Newsletter
The 'JIN' J@pan Inc Newsletter
A weekly opinion piece on social, economic and political trends
in Japan.
Issue No. 485 Wednesday October 8, 2008, Tokyo

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The ripples of the fallout on Wall Street continued to spread Tuesday
with Japanese shares plunging to their lowest point in half a decade.
As the world continued to watch the widening financial crisis, the
focus turned to Tokyo again as the Nikkei 225 index dropped 3.03
percent to close at 10,155.90. This marked the lowest finish since
December 2003. In the morning it was down more than 5 percent to
9,916.21 but managed to recover by the end of the day. The Topix index
also lost 2.15 percent to 977.61.

Bank of Japan Governor Masaaki Shirakawa gave a typically pointless
comment saying that the fall reflected the decline of stocks worldwide
caused by the collapse of various financial institutions.
"Share prices reflect a view on the economy. We will be carefully
monitoring their impact on the economy as always," Shirakawa told a
news conference. Thanks.
The losses followed the Dow Jones industrial average in New York
closing below 10,000 for the first time since 2000 on Monday. Markets
across Europe were also hit hard.

Japan's manufacturers have been taking a beating from all the turmoil.
On Tuesday some of the big carmakers were badly battered. According to
a report by AP, Mitsubishi was down 10.3 percent to 131 yen. Nissan
fell 4.79 percent to 556 yen, and Toyota dropped 4.87 percent to 3,710

Of course it wasn't just Tuesday's drop in the share markets that
damaged the nation's manufacturers. On Monday, Sharp cut its earnings
forecast due to a slump in its domestic mobile phone business. The
company cut its operating profit forecast for the year to March 2009
by 33 percent to 130 billion yen. Worsening conditions over the last
couple months were blamed.
"The severe business environment should continue from the third
quarter onward, especially for mobile phones and relevant electronic
components," the company said in a Financial Times report. The
situation within the financial markets is not the sole cause for
Sharp's cutting of forecast earnings. Industry-wide mobile phone
sales, down almost 30 percent on the previous year in July, were
largely to blame.

Also making news on Tuesday was the BOJ's announcement, after its
two-day board meeting, that it would leave interest rates unchanged at
0.5 percent (is that news if nothing happens?). It was the 20th
consecutive month for this to happen. The central bank said in a
"With regard to risk factors, strains in global financial markets
have intensified in the wake of failures and rescues of U.S. and
European financial institutions and there are downside risks to the
world economy."

But it wasn't all bad, right? Not for Japan's banks, which continue to
gobble up Wall Street. The US Fed announced that it would approve the
purchase of a stake in Morgan Stanley by Japan's largest bank,
Mitsubishi UFJ Financial Group. MUFG will acquire up to 24.9 percent
of the voting shares of the U.S. investment giant. This of course
follows Nomura's big Lehman acquistions.

There are plenty of skeptics out there raising their eyebrows about
the acquisitions being taken on by some of the big Japanese names. But
at this point, those with capital are going to buy what they want and
the fire sales on Wall Street will continue.

Michael Condon

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