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The Tokyo stock market has taken a severe beating in recent days.

With the downtrend continuing unabated, the 225-issue Nikkei average is now threatening to fall below the 11,000 level.

One theory holds that stock markets foreshadow cyclical changes awaiting the economy and corporate earnings.

If the current market performance is indeed a prelude to what will actually happen in the months ahead, the Nikkei average could, in the near term, remain trapped in a narrow range between 11,000 and 12,000.

The same pessimistic outlook is prevalent around the globe right now, with the New York stock market rout spilling over into other markets.

The recent tumble in New York share prices was triggered by a slew of dismal earnings reports on the part of big-name information technology companies.

All around the globe, mediocre earnings in the technology sector are weighing heavily on stock prices.

In Japan, fears that the restructuring program of Prime Minister Junichiro Koizumi could have a deflationary impact on the economy have added to the downward pressure on stock prices.

There has been a tendency in the U.S. in recent years for industry to rely heavily on the Federal Reserve’s political clout.

Indeed, the Fed has met industrial expectations, having engineered a soft landing in which economic growth has slowed enough to keep inflation from getting out of hand, but not so much as to topple the country into a recession.

Excessive reliance on the Fed’s political influence, nevertheless, has engendered a “moral hazard” — the hope that the central bank will help if things get bad. Industrial optimism has backfired.

Alerted by the visibly worsening business environment, executives in the U.S. electronics industry and other sectors became cautious over earnings prospects last summer and began stepping up restructuring late last year.

U.S. corporate managers have launched earnest, if belated, cost-cutting in preparation for hard times ahead.

The delay in business restructuring caused by the moral hazard has come back to haunt the U.S. economy.

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