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Home > Media Reiews > News Review Last Updated: 14:53 03/09/2007
News Review #117: April 1, 2003

Year-end stock falls add to Japan banks' gloom

Reviewed By Hitoshi URABE

"Year-end stock falls add to Japan banks' gloom"
(by Chikako Mogi) Reuters/Yahoo


It seems people were hanging on in the hope for some sort of buying power to come in to the market on March 31, if only for psychological comfort. When it became apparent that no such help was coming, toward the afternoon session of the end of fiscal year trading, stock prices fell further, losing 3.71 percent for just the day, to mark 7,972.71. The level was the lowest for the fiscal end in 21 years, since 1982 that recorded below 8,000, at 7,260.480.

Except for the governments and certain tightly regulated industries, one of which being banks, it is generally up to each corporate entity to choose its timing to close the books. But for customary and other reasons, just about every major corporation in Japan calculates its results for the year as of end March. This is why the end of March stock prices makes it so important, as it would affect the asset value of stock holdings of significant number of Japanese companies.

Nevertheless, the impact is felt most severely in the banking industry, as detailed in the article, their recent efforts to raise equity levels would be consumed by covering the loss incurred by revaluating their stock holdings at market prices, and not to strengthen their capital bases as originally intended.

Japan's lawmakers and administrators have been for a long time searching and testing for means to boost stock prices by asserting direct influence on the market. Their attempts were often dubbed, sarcastically, as PKO (price keeping operation) or PLO (price lifting operation) and such. In the past, they introduced strange regulations with the only purpose to raise apparent prices of stocks. Sometimes it worked, but the real problem, as anyone with experience in the real financial market would recognize, is that such intervention, especially those intended to control the prices, would be harming the confidence of the market, in effect alienating legitimate investors.

If a lesson could be learned from the experiences through the years, there is no better way to vitalize the market than to attract sound investors' interest, and subsequently funds.

While fully appreciating the fact that the stock prices seem undeservedly low to many, the urgent issue is not finding ways to prop up the prices in the short run, but measures to bring back the confidence in Tokyo market by decent and innocent, and perhaps potential, investors.

Thus, assuming that the apparent inaction by the regulators or other public entities this year was a result of such recognition, it should be considered at least as a beginning to rebuild Japan's stock market.

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