Japanese share prices yesterday closed the year down 42.12 percent from last year, marking the worst-ever annual percentage fall in Tokyo’s Nikkei index as the global economic crisis hit hard.
Analysts predict the market could face more pain in the new year as the world reels from the worst financial downturn since the Great Depression.
The Nikkei ended at 8,859.56 points as it closed out the year with a half-day session. The stock market reopens on Jan. 5.
The year’s fall was the worst in percentage terms since the index was established in 1949.
“It was a year beyond our imagination,” said Kazuhiro Takahashi, an analyst at Daiwa Securities SMBC.
Global markets, already reeling from a credit crunch, went haywire in September when Wall Street titan Lehman Brothers went belly-up under a mountain of debt.
The Japanese market repeatedly posted some of its biggest ever rises and falls. In October, the Nikkei plunged to a 26-year low.
“No one could stop the massive negative chain of events,” Takahashi said.
“First we thought it was a matter of the financial industry, but it quickly spread to the real economy around the world,” he said.
This year, shares were hardest hit in the auto sector with all of Japan’s carmakers drastically cutting their earnings forecasts due to falling demand in the US and Europe as well as a soaring yen.
Shares in auto leader Toyota Motor Corp — a year ago a pillar of the Japanese economy — lost half of their value this year.
The falls were even more dramatic for some of their competitors such as Nissan Motor Co and Mazda Motor Corp as well as for some major Japanese exporters.
Shares in Sony Corp tumbled 69 percent this year, while top bank Mitsubishi UFJ Financial Group was down 47.56 percent.
While this year was the worst-ever year in percentage terms, the Nikkei suffered a bigger fall in points in 1990 with the end of Japan’s bubble economy, shedding 15,067.16 points or 38.71 percent of its value.
The market at least ended the year on a positive note, rising 112.39 points or 1.28 percent in yesterday’s abbreviated session.
The Topix index ended the year down 41.77 percent at 859.24. For the final session of the year, the index rose 4.47 points or 0.52 percent.
Dealers said the market was optimistic about upcoming economic stimulus plans as US president-elect Barack Obama prepares to take over on Jan. 20.
Dariusz Kowalczyk, chief investment strategist at CFC Seymour in Hong Kong, expected the market to rise later in the year. He predicted the Nikkei would grow 27 percent in the new year.
Dealers said Japan could also benefit from greater political stability next year. General elections must take place by September, with polls showing the opposition in a strong position to win — an outcome that would end a divided parliament in place since the middle of last year.
But Takahashi warned that Japan still had a long way to go before lifting out of its recession, with the auto industry’s woes leading to higher unemployment and dragging down the entire economy.