Economic woes continue By Chris Tracey, investment director The broad TOPIX Index rose by s...
Economic woes continue
By Chris Tracey, investment director
The broad TOPIX Index rose by some 3.5% over the month and a relatively subdued 6.8% from its low of 12 September. Japanese investors were subdued because of the continued barrage of poor economic news. Industrial production fell in September by 12.9% year on year, the largest monthly fall since May 1975. Unemployment rose to a post war high of 5.3% and the Bank of Japan lowered its economic forecast for this and next fiscal year to -1.2% and -1.1% respectively. Despite this dire outlook, the central bank still refused to budge from its no monetisation stance. The Bank of Japan also announced that the banking sector's holdings of government bonds had doubled from last year to some 10% of total assets, potentially another disaster waiting to happen were bond yields to rise rapidly. Nor were there any signs that a comprehensive programme of reforms was about to be announced.
The interim reporting season was very downbeat, but it is encouraging to us that full year forecasts appear to be much more realistic and that in the face of deteriorating domestic and overseas demand major restructuring proposals are being announced. Notable examples include TDK, which announced that it was to close three overseas and four domestic plants and cut its workforce by 20% by March 2003. It is also noticeable that although the major indices are labouring there is a lot of activity in the OTC market, particularly in new issues, which suggests that the individual investor is still alive and well. We remain a little underweight.
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