The Tokyo stock market bottomed out in October 1998 and has since come a long way, moving past one major threshold after another.

The uptrend, however, has run out of steam.

Information technology stocks and other high-flying issues have come under severe selling pressure, sending the whole market reeling.

The considerable loss of market value among the high-priced stocks has set off demands from stockbrokers for bigger cash deposits from individual investors who have borrowed from them.

All around the globe, IT shares — recent favorites of investors both at home and abroad — are taking a battering.

The continuing volatility of the market could have a serious negative impact on the general election expected to take place on June 25.

Conventional wisdom holds that share prices move in tandem with the public approval rating of the Cabinet.

Indeed, a stable stock market has often worked in a ruling party’s favor, while political uncertainty is always a typically bearish scenario for stocks.

When the economy is showing signs of improvement, ruling parties can easily enlist the voting public’s support.

As Tokyo share prices have recently been stuck at depressed levels, however, many foreign investors appear to be predicting the ruling coalition’s defeat in the forthcoming election and a delay in the nation’s deregulation and economic restructuring programs.

Aside from the tumble of IT shares, the market has also been hit hard by last month’s reshuffling of the Nikkei average components.

The April 24 replacement of 30 of the 225 issues listed on the benchmark index took a heavy toll on the market.

The reshuffle was aimed at bringing the market gauge more in line with the nation’s changing industrial structures, a clear departure from the traditional policy of giving priority to the continuity of the valuation of the index.

The sudden shift in policy has stirred up a lot of skepticism in the marketplace.

Needless to say, a lack of careful attention to the continuity of the index valuation makes it difficult for investors to judge whether the market is properly valued.

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