Japanese investors' plans to move money to the US this fiscal year are vanishing faster than you can say WorldCom Inc.
Yasuhiro Miyata, manager for investment planning at Dai-Ichi Mutual Life Insurance Co, was among investors who dropped his plan to buy US stocks in the days after regulators began probing accounting practices at WorldCom, the No. 2 US long-distance phone company. Japan's second-largest life insurer had planned to put more money in US equities starting April 1.
Miyata and other investors say the dollar may weaken as US stocks fall and other companies draw attention from regulators and investigators.
"We don't know when stock prices will stop falling," said Miyata at Dai-Ichi, with ?2.9 trillion (US$24.9 billion) of overseas assets as of March. "The cases turned out not to be accidents, but a constant stream that undermined the whole accounting system of the nation."
Some fund managers are also concerned more losses may follow after the Standard & Poor's 500 Index fell 21 percent this year and the dollar dropped almost 12 percent against the yen.
The US currency will probably fall below ?115 by September, said Masafumi Tsuchida, manager for the Finance Group at Toshiba Corp, the world's second-largest chipmaker. He said he's looking for any gains in the dollar as opportunities to sell it.
Finance Minister Masajuro Shiokawa, speaking earlier this month when the dollar was at about ?120, said it may weaken to ?115.
Japanese fund managers aren't just losing money on US stocks. An index of Treasury bonds maturing in a year or more has handed yen investors a loss of 8.3 percent over the past three months, according to the European Federation of Financial Analysts' Societies. An index of like-maturity Japanese bonds rose 1 percent.
"Declines in the dollar and stocks are damping the attraction of the US, in turn increasing the attraction of Japanese assets, especially bonds," said Yuuki Sakurai, who helps manage about ?1.7 trillion in debt at Fukoku Mutual Life Insurance Co.
Fukoku Mutual, the nation's 10th-largest life insurer, reduced its overseas holdings by selling Treasuries earlier this year and may not increase them soon, Sakurai said.
The danger now is that falling stocks will stall the world's biggest economy by making Americans cut back on spending, traders said. On Friday, an index of consumer confidence compiled by the University of Michigan had its steepest decline since the September terrorist attacks against the US.
"The risk is increasing that tumbling stocks and the economy go into a negative spiral, pulling each other down," said Takashi Miyazaki, one of the investors for ?1 trillion in stocks at UFJ Partners Asset Management Co. His company has fewer US stocks and more Japanese equities, proportionally, than are in benchmarks used to gauge performance.
Some Japanese investors say they're still considering moving money to the US, even if their plans are on hold for now, because the US economy may still grow faster than the economies of Japan or Europe.
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