Fears of economy overheating trigger a tumble in Tokyo


Tokyo Ater a brief but bright spring, the Tokyo Stock Exchange headed toward summer in deep gloom last week, victim once again of the twin menaces of cascading scandals and free-falling prices.

The worst day was Wednesday, when the 225-stock Nikkei Index, the market's most-watched gauge, lost 688.72 points -- 2.8 percent of its value -- in a single session.

That left the Nikkei at 23,996.75, its first close below 24,000 since Feb. 6, when the TSE was belatedly joining the rest of the world's exchanges in their spectacular recovery from the effects of the Persian Gulf crisis.

What shocked the market into Wednesday's rout was resoundingly good economic news.

Government figures released Tuesday showed that, partly due to special one-time-only factors, Japan's gross national product had grown at an astonishing annualized rate of 11.2 percent in the first quarter of 1991. Government and private predictions of growth for this year have been about 3.5 percent.

That good news for the economy devastated the market because it wiped out the last remaining credibility of those who have predicted that a relaxation of the Bank of Japan's 2-year-old, tight-money policy was no further away than "next month."

The week's gloom also included:

* Charges that Nomura Securities, the dominant member of the country's "Big Four" stock brokerages, had "reimbursed" hundreds of millions of dollars that some of its biggest clients had lost in stock dealings in the course of last year's market crash.

* Separate charges that financing provided by Nomura and otherhouses helped a kingpin in the Yakuza, Japan's organized crime underworld, finance criminal activities and more than a decade of stock manipulations and speculating.

* Corporate reports that showed debilitating declines in profitability for all of the Big Four, caused not only by the 1990 crash of the Tokyo market but also by the weakness of stock markets around the world.

Nomura reported a decline of nearly 57 percent in after-tax profits, Daiwa's earnings fell 63 percent, and Nikko and Yamaichi reported even larger drops.

Combined with nearly three weeks of slippage in stock prices that preceded it, Wednesday's TSE plunge wiped out well over half of the Nikkei's post-Desert Storm recovery.

But Thursday and Friday may have been more telling days.

Even with the help of bottom-fishing bargain-hunters, a recovering yen and unexpectedly strong performances in the bond market, the Nikkei reclaimed 85.51 points Thursday and 192.82 Friday. It closed the week at 24,275.08, or more than 2,000 points down from the level at which it traded in the brighter days of March and April.

Even if it proves to be a new bottom, Friday's close leaves the Nikkei 21 percent lower than the 30,837.99 it recorded the day before Iraq invaded Kuwait last August.

It also is more than 37 percent under the peak of 38,915.87 the Nikkei recorded on the last trading day of 1989.

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