Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Tokyo Market: Nowhere to go but bonds

Tom Kariya
Saturday 29 August 1998 23:02 BST
Comments

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

JAPAN'S Nikkei stock average may fall as low as 13,000 next week - a depth untested since January 1985 - and bonds are likely to rise amid fears that global financial markets are trapped in a downward spiral.

Exporters and banks may lead the retreat as investors, worried that Japan's own financial crisis is worsening, face the prospect of deepening economic chaos in Russia and further declines worldwide.

That combination of external and internal pressures routed Japanese stocks last week. The Nikkei 225 index plunged 1,382.57 points, or 9 per cent, to a 12-year low of 13,915.63.

"We can't see the bottom," said Koji Tada, a general manager at Towa Securities' equities department. "If the US and European markets really start to plunge, there could be no stopping this thing."

Exporters such as Sony and Bridgestone, which rely heavily on a healthy US market, may be sold if Wall Street continues its losing ways. Banks, including Bank of Tokyo-Mitsubishi, the world's largest lender, may be dealt a double blow. While regional economic turmoil increases the risks of defaults by Asian borrowers, bickering between government and opposition parties threatens to stall legislation to stabilise Japan's debt-burdened financial industry.

Market participants hope the US and Germany will lower interest rates. Those expectations limited losses by exporters such as Honda on Friday.

Japanese bonds surged last week. The Japanese government bond, maturing in September 2005, rose Y163 per Y50,000 in face value, pushing the yield down to 1.070 per cent. "The most important thing for investors is finding a safe place to put their funds," said Naomi Hasegawa, a senior economist at Tokyo-Mistubishi Securities.

"There's nowhere else for investors to put their money except in bonds," said Sadao Suzuki, an asset allocation manager at Asahi Mutual Life Insurance.

Bonds may get additional support from speculation that the Bank of Japan might use money market operations to supply ample funds to banks and other short-term borrowers, pushing down short-term interest rates.

Some economists fear that if instability in world financial markets intensifies further, even bonds may lose their appeal.

"There may be a shift from 'flight to quality' to 'flight to cash'," said Tokyo-Mistubishi's Mr Hasegawa.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in