Fears are growing in Japan that the relentless slide in Tokyo stocks might topple companies, even top banks, and further harm the already hobbled economy at a time when the government is finally getting serious about cleaning up the nation's bad debt mess.
The main index on the Tokyo Stock Exchange plunged again yesterday, closing at a new 19-year low for the third time this week. The 225-issue Nikkei Stock Average fell 1.17 percent to 8,439.62 points, its lowest finish since April 8, 1983.
"Japan is going to sink and turn into a nation of beggars," said Masaoki Takahashi, 58, whose land development business has been struggling to win bank loans for some time. "It's a big mess."
Like many Japanese, Takahashi was worried that Prime Minister Junichiro Koizumi seemed to have no plan to salvage the economy.
The stock market has been lagging at 19-year lows for weeks. But the plummet took a turn for the worse shortly after Koizumi picked a new Cabinet Sept. 30 and made economy minister Heizo Takenaka in charge of financial services as well.
Takenaka promised to speed up the cleanup of bad debts at the banks in a "quicker, larger-scale and more understandable" way.
The promise was supposed to reassure investors and analysts, who have long complained that bad debts in the financial sector are dragging down Japan's economy and preventing a solid recovery.
Instead, Takenaka's comments set off serious worries that corporate bankruptcies -- even of major banks -- may be inevitable.
Investors have been fleeing in droves.
The Nikkei Stock Average, which stood above 9,300 at the end of September, has shed about 10 percent in this month's eight trading sessions.
One big problem for Japan is deflation, a situation in which prices continue to drop, eroding the value of assets as well as collateral for loans.
"Trying to tackle bad loans without first dealing with deflation is simply a crazy feat," said Yasushi Okada, chief economist at Credit Suisse First Boston in Tokyo. ``The prime minister is more interested in structural reform and doesn't really care about economic recovery.''
On Thursday, Koizumi's spokeswoman, Misako Kaji, seemed to shrug off worries about the stock market and denied the government was considering any specific measures to stem the nose-dive in share prices.
"The fall in US and European stock markets are also behind this," she said, adding that an economic package was being planned for later this month.
"There can be no economic recovery without structural reform," is Koizumi's pet slogan. And he often appears more determined to wipe out corruption and waste than rely on old-style bailouts to stimulate economic growth.
Although widely praised for trying to stick to reforms -- and still relatively popular with the public -- Koizumi has delivered little so far for average Japanese looking for an economic boost.
The unemployment rate remains at a near-record high 5.4 percent, consumer spending is flat, paychecks are shrinking and the weak recovery the nation has managed to muster remains heavily dependent on exports.
Recent signs that the pace of the US recovery may be slowing is a big danger for Japan's shaky recovery.
Restoring health and efficiency to the nation's banks, ending the flow of funding to unprofitable companies and cleaning up bad debts may be key steps to putting Japan on a turnaround track.
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