Record Loss of 9% in Japan Stocks

123jump.com Staff
08 Oct, 2008
New York City

Japan stocks plunged in a record one-day loss since 1987. Rising bankruptcies, worries related to banking sector health and falling profits from automakers dragged markets lower. Toyota dived 11% after media reports suggested 40% fall in profit for the current year.

[R]5:00AM New York, 7:00PM Tokyo – Japan stocks in a record plunge in 21 years tracked losses in the U.S. Investors worry that rising bank losses will require more capital injection for banks. Japan bankruptcies jump 34% to 1,408 cases in September.[/R]

Japan market averages plummeted sharply after bankruptcies increased 34% in September and IMF revised estimate of losses on U.S. loans and securities to rise to $1.4 trillion from $1.3 trillion.

Market Sentiment

In Tokyo trading Nikkei 225 fell 9.8% or 952.58 to 9,203.32, and the broader Topix Index slumped 8% or 78.60 to 899.01.

In the first section of the Tokyo Stock Exchange 11.2 billion shares valued at 934 billion yen were traded and in the second section 332 million shares valued at 2.4 billion yen changed hands.

Of the Nikkei 225 stocks 224 declined, and one was unchanged. Unitika Ltd. led decliners in the index shares with a fall of 20.83%.

Japan Bankruptcies Rise 34% in September

Tokyo Shoko Research corporate bankruptcies climbed 34% to 1,408 cases in September as the credit market freeze curtail lending and shrink economic activities.

Failures in construction and manufacturing rose 41% and 44% respectively in the month under review, while bankruptcies in transportation surged 133%. Finance and insurance bankruptcies also rose 56% in the month.

Japan Passes 1.81 trillion yen Supplementary Budget

Nikkei News reported that House of Representatives Budget Committee in Japan cleared a 1.81 trillion yen supplementary budget to provide a stimulus to the economy. Bank lending remains tight and real estate markets are soft.

U.S. Loan Loss Estimate Revised to $1.4 trillion

The International Monetary Fund reported on its Web site yesterday in the Global Financial Stability Report (GFSR) that there was need for coherent and decisive interventions to stem the current deleveraging from being """"disorderly and costly to the real economy"""".

According to GFSR, the losses on the U.S. mortgage securities are expected to increase to $1.4 trillion from an earlier estimate in April of $945 billion.

The report prescribes a three-part approach to stave off disorderly deleveraging through the government purchase of illiquid and impaired assets from lenders, injecting capital into viable institutions that are struggling and rescuing dysfunctional funding markets.

The Fund projects that financial institutions need to raise $675 billion, but however noted that the interbank lending has seized.

The GFSR estimates that credit growth in the United States, the euro area, and the United Kingdom will ease to near zero over the next year before regaining in 2010.

Jaime Caruana, Director of IMF''s Monetary and Capital Markets Department said, """"A comprehensive approach, if consistent among countries, should be sufficient to restore confidence and proper functioning of markets and avert a more protracted downturn in the global economy.""""

Yen Rises

The yen today breached the psychological mark of 100 yen against the dollar on falling Asian stocks.

Gainers & Losers

Unitika Ltd. led decliners in the Nikkei 225 index shares with a fall of 20.83% followed by losses in Fujikura Ltd of 18.87%, in Furukawa Co. Ltd of 17.24%, in Nippon Light Metal of 17.17%, and Nitto Boseki Co. of 16.97%.

Automakers Slide on Toyota Worries

Toyota Motors declined sharply in a record single-day loss in two decades after Nikkei News reported that annual earnings for the current fiscal year may fall as much as 50%. The newspaper, without citing any sources suggested that operating profit could decline 40% to 1.3 trillion yen or $11 billion from 2.27 trillion yen a year ago. Toyota has set the estimate of 1.6 trillion. Falling exports and sales to the U.S. are expected to be the major contributor to the decline. Toyota sales in the U.S. in September declined more than 25% and sales of Honda, Nissan and Mitsubishi fell more from a year ago.

In the last few months yen strength has also contributed to the weaker profit projection in yen terms. A rise of 10 yen against dollar lowers the operating profit by 400 billion yen according to earlier projections by Toyota. The company also lowered its unit sales forecast in August to 8.74 million from 9.06 million, a decline of near 4%.

Toyota lost 11.6% to 3,260 yen, Isuzu Motors dipped 14.29%, and Hino Motors dropped 13.74% and Honda Motor dropped 10%.