The Tokyo stock market began the 21st century lackluster amid concern over the stalled economic recovery and selloffs to unwind cross-shareholding ties.

Investors need not, however, be too pessimistic. Corporate capital spending is still on the rise and, given increased yearend bonuses, consumer spending could begin picking up soon.

Stock prices now reflect economic concerns to an excessive degree.

Since Japanese firms as a whole are expected to boost pretax profits by around 10 percent in fiscal 2001, their price-to-earnings ratios are relatively low. Naturally, stock prices are expected to stage a moderate rally.

Should stocks keep falling during the rest of fiscal 2000 to March 31, a considerable number of financial institutions are sure to descend into troubled waters. In this event, a recurrence of the 1998 financial crisis cannot be ruled out.

Under the current circumstances, it is believed the government will come up with measures to prop up stock prices. These could include curbs on short selling, share purchases with public funds and even a delay in the introduction of accounting rules to assess cross-held shares based on their market values.

A cardinal rule is to buy shares when market participants are pessimistic. I thus recommend that investors start buying shares supported by good earnings prospects.