The benchmark Nikkei average has been moving between 11,000 and 12,000 for nearly two months in the absence of strong incentives to drive the market either up or down.

It is noteworthy that Japanese and U.S. stocks no longer move in tandem.

When U.S. stocks fell in the past, Japanese stocks did the same but at a faster pace.

Recently, however, Japanese stocks have declined only moderately as U.S. stocks have tumbled.

The Dow Jones industrial average on the New York Stock Exchange has fallen 5 percent from its March high, while the Tokyo market’s Nikkei average has dropped only a little more than 2 percent.

This is because of the degree to which Japanese stocks have fallen over the past decade. The 225-issue Nikkei average now stands at roughly 70 percent below its record high of 38,915.87 set on Dec. 29, 1989.

There is little room left for further decline.

In contrast, U.S. stocks hit their peak in 2000 and currently stand at some 15 percent below their record-high level.

Another difference reflects the economic conditions in the two countries.

Although macroeconomic activity in the United States seems to have bottomed out in the last quarter of 2001, the outlook for microeconomic activity, namely corporate earnings, remains very uncertain.

In Japan, macroeconomic recovery has yet to be felt due partly to the sluggish disposal of bad loans at banks, making it unclear when corporate capital spending and consumer spending will begin to pick up.

Still, corporate earnings are forecast to show large profit increases in fiscal 2002 in a turnaround from the previous year.

Even without a pickup in sales, Japanese companies are expected to boost profits by consolidating management resources; restructuring, including personnel cuts; and tying up with other companies.

As stock prices are greatly affected by corporate earnings, the economic situations in Japan and the U.S. indicate that a recovery in stock prices in Japan will be faster than in the U.S.

This view has been bolstered in light of the yen’s recent appreciation against the dollar.

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