Japanese stock benchmarks may stay near two-decade lows unless the government boosts the economy and forces banks to get rid of more than US$420 billion in bad loans, some investors said.
Mizuho Holdings Inc, Ito-Yokado Co and other companies that rely on domestic demand may slide.
"In my 15 years of investing in the Japanese stock market, this is the worst I've seen," said Joji Maki, who overseas US$3.6 billion in assets at Baring Asset Management (Japan) Ltd. "It's infuriating that the government is not painting a clear picture of how it intends to clean up the mess."
Taiwan stocks may rise, led by Quanta Computer Inc (
Kookmin Bank and other South Korean lenders may gain after Moody's Investors Service raised the nation's debt-rating outlook.
In Hong Kong, developers may decline on concern that government measures announced this week to stem a slide in property prices won't be enough to offset a glut of apartments.
The Nikkei 225 Stock Average fell 2.2 percent to 8,503.59 in the week just ended. UFJ Holdings Inc., Japan's fourth-largest lender, dropped 31 percent and was the worst performer. The Nikkei on Thursday closed below the Dow Jones Industrial Average for the first time since February.
In the US on Friday, the Dow Jones Industrial Average added 0.4 percent, which helped it climb for a sixth week, its longest weekly winning streak in more than three years.
Lack of decisive government action to help banks clean up bad loans may keep the Bank of Japan from changing monetary policy to support the financial system when policy board members meet Nov.
18, some investors said.
All 16 economists, fund managers and currency traders surveyed by Bloomberg News don't expect the central bank to change policy.
The central bank's decision will be announced on Nov. 19.
Japan Prime Minister Junichiro Koizumi on Nov. 22 may call for about Japanese yen 5 trillion in new funds to cover tax shortfalls and help an economy that's in its third recession in a decade, Finance Minister Masajuro Shiokawa said today.
The Nikkei has fallen to a 19-year low twice this month on concern that the government won't do enough to counter potential ripple effects on the economy from the possible nationalization of banks with the weakest borrowers. A record 28 publicly traded companies have failed so far this year.
Investors "want to see more a proactive and aggressive approach in dealing with Japan's non-performing loans," said Ian Burden, chief investment officer at Invesco Asset Management (Japan) Ltd.
Exporters such as Sony Corp and Toyota Motor Corp may gain after the University of Michigan's consumer sentiment index showed an increase to 85 in November from 80.6 in October.
Acer Inc, the only Taiwan computer maker with an international brand name, may advance.
The nation's GDP grew 4.77 percent in the third quarter compared with the same period a year ago. That's faster than 4.4 percent economists in a Bloomberg News survey expected.
Taiwan is selling more of its computer chips, notebook-computer components and other goods to China and the US as it recovers from a record slump last year.
Moody's raised South Korea's debt-rating outlook to positive from stable, citing the improving economy.
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