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Nikkei average falls for tenth straight day, first time since…

The Nikkei just closed this afternoon at 13,286.37 - down 176.83 points. Today was the tenth consecutive trading day to finish at a loss. When was the last time the Nikkei declined for ten straight days? February 1965.

The shipping, automotive, machinery and insurance industries all felt the sting of decline. Now it’s time to see if the dollar can hold above that 105 position against the yen…

Have Japanese equities hit bottom yet?

Today was the last day of financial 2007, and the Nikkei Index dove 294.13 points to finish at 12,525.54 - marking a 27.5% decline since April 1, 2007. To make matters worse, paper gains on shareholdings at Japan’s six major banking groups dropped by 62% over the same time period, according to the Nikkei. This was the first time that unrealized profits from equity holdings declined at the six major banks since 2003. On the other hand, the same six banks saw 100 billion yen in paper gains in bond holdings, the first time they’ve been in positive territory since 2002.

At the same time, the Nikkei also estimates that the market value of shares held by publicly traded firms in Japan declined 30% in fiscal 2007. This would represent a loss of 8.7 trillion yen of (paper) wealth. There seems to be heightened risk developing if the Nikkei should move lower, as many Japanese firms are boosting their cross-shareholdings in an effort to thwart would-be takeover attempts. Read more

Japan’s leadership searching for excuses for the Nikkei’s drop, and waiting for instructions

Wednesday morning’s Nikkei is reporting that Japan’s six major banks have seen unrealized profits on their equity holdings reduced by some 60% since the end of last September. That adds up to a decline of 70% in value since the end of June 2007.

Yesterday didn’t help much, as the Nikkei lost 752.89 points to close at 12,573.05. Combined paper profits at the six firms have been wiped down from 12.5 trillion yen at the end of September to somewhere in the 6-7 trillion yen range.

What attention has all this gotten from Japan’s policy makers? Back on January 15, State Minister for Economic and Fiscal Policy (should those really be the same job?) Hiroko Ota told reporters, “The various price rises, including for food, are starting to affect consumer sentiment bit by bit…I want to watch things very closely.”

Not reassuring. Ota was commenting on the Economy Watchers Index, which had been released the week before and was down for the ninth consecutive month. The survey’s index hit its lowest level since January 2003. The Economy Watchers Index measures sentiments amongst people whose jobs are sensitive to changes in economic conditions - taxi drivers, barbers, restaurant workers, hotel staff and so on. Edward Hugh posted a chart over at Japan Economy Watch that shows how this index has fallen over the past year.

Nine straight months down. Ota’s response? Again: “I want to watch things very closely.” Read more

Nikkei pounded again; looking to the Bush administration for economic relief measures a bad strategy

On Friday, Japan’s Jiji Press published an article with the headline, “Tokyo Stocks Seen Regaining Some Ground Next Week.” An excerpt:

Tokyo stocks are expected to recover some ground next week as buyers seek to benefit from attractive valuations and moves by U.S. policymakers to rescue the world’s biggest economy from the threat of recession.

“The time is ripe for an upturn for stocks,” Hideyuki Suzuki, senior analyst at Morningstar Japan K.K., said, explaining that the U.S. government and Federal Reserve are starting to take serious measures to shore up the flagging economy, while U.S. corporate earnings news has likely passed its worst for now…

…But stocks pared some losses late in the week thanks to a reported plan by the administration of U.S. President George W. Bush to launch an economic stimulus package and growing expectations of immediate and bold interest rate cuts.

Unfortunately, it seems everyone except for Jiji realized that the Bush administration’s “reported” plan is a joke. As John Fund from the Wall Street Journal commented on Bill Mahr’s show this week, “Is the solution these $250 rebates? I mean, we might as well just take a helicopter and spread it around the country.”

Of course, the Bush administration’s plan is a political ploy. And depending on the Bush administration during an election year to prop up your hurting stock market is, umm, well, (fill in the blank).

At any rate, the Nikkei got absolutely pounded today, losing 535.35 points to finish at 13,325.94. It’s now down 12.95% on the year. Could there be a recovery this week? Of course it’s possible. But Monday’s action dug an ugly hole.

Weekend articles: Downward pressure on the Nikkei in 2008

Market watchers are already aware that Friday was Japan’s first trading day of 2008, and that the Nikkei closed down 616.37 points, finishing at 14,691.41. This was the largest fall ever for an opening day of trading and sent the Nikkei index to its lowest level since July 2006.

While there are certainly going to be arguments put forth (including here) that Japanese equities are currently undervalued and that some industries have solid investment promise, it’s time to look just a bit at the downside risks for Japan’s stock markets in 2008. I should stress the phase “just a bit” since we’re primarily going to be look at a set of articles that were published over the past few days. Read more

Nikkei: Japan at less than 10% of Global GDP for first time since 1982

That headline is only the beginning of the bad news in Thursday’s edition of the Nikkei, though it may be indicative of what 2008 has in store for the economy. Essentially, the Nikkei is reporting that in 2006, Japan’s share of global GDP stood at 9.1 percent, which is the first time in 26 years that Japan as accounted for less than 10 percent of global GDP. According to revised figures published Wednesday by the Cabinet Office, Japan’s GDP grew 2.4% in real terms, but fell 4% in nominal terms in 2006. The global economy grew at about an 8% pace in that year.

In another story, we learn that Japan’s IPO market is shrinking, and the blame is placed on…you guessed it: A lack of auditors and stricter regulations. As the Nikkei put it:

Before listing on the Mothers market [for startups] of the Tokyo Stock Exchange earlier this year, a manufacturer asked about 200 business partners to submit reports confirming that it has “no relations whatsoever with crime syndicates and other antisocial forces.”

The Nikkei also points out that the Tokyo Stock Exchange currently has no way to verify the veracity of a given firm’s claim to have no ties to “antisocial forces.”

Then, we see that according to a Nikkei survey, the percentage of CEOs who feel that Japan’s economy is expanding has fallen from 79% in October to 64% in December. 96% of the 134 CEOs surveyed said that the fall in housing starts is hurting the economy.

Finally, two stories we haven’t seen in English yet:

1) In fiscal 2006, Japan’s personal savings rate fell to 3.2 percent of income, and now stands at an historical low. The Cabinet Office asserts that wages increased 1.8% that year. Japan’s savings level peaked at 11.4% of income back in fiscal 1997.

2) The Japan Travel Board announced that in 2007, the number of Japanese traveling overseas decreased by 1.1 percent, showing the first fall in 4 years. This is something we will probably have to get back to, but what stands out to us in the report is JTB saying that fears over food safety in China have put negative pressure on the number of people willing to travel there.

However, there was no word on how fears over food safety have affected tourism to Hokkaido…

Nikkei: Pretax profit at listed firms up 10.9% in first half of FY2008

A few weeks back, we saw the Nikkei predicting that Japan’s listed firms would post a 5.7% increase in pre-tax profits for fiscal 2008. For that prediction to come true, they’re going to have to have a pretty bad second half of the year.

In Saturday’s edition of the paper, the Nikkei reported that “combined pretax profits at publicly traded companies soared 10.9% in the first half [of the financial year] ended in September.”

While the Nikkei’s numbers exclude startups and financial firms, we do see an obvious trend with manufacturers seeing a 14.1% increase in pretax profit, while non-manufacturers were limited to an increase of 5.4 percent.

The winners: electronic-appliance firms (+22.7%), precision-equipment manufacturers (+22%), and automakers (+18.4%). All exporters who loved that cheap yen.

On the other side of the coin were electricity and gas providers, who saw a 21.9% fall in pretax profit due to higher oil costs, construction companies (-8.5%), and retailers (-4.1%).

The question now is how long the stronger yen will last. Will the Fed be raising US rates again, thereby putting further downward pressure on the dollar? Could we possibly see both manufacturers and nonmanufacturers head into negative profit growth territory for the October-March half of fiscal 2008?

G.communication announced as sponsor for Nova

It looks like the speculation from the Nikkei article from a few days back turned out to be spot on, at least so far. On Monday, the Nikkei wrote that given Nova’s financial situation, a breakup of the company would be possible, and, “With a thorough evaluation of its assets yet to be conducted, listed companies would likely hesitate to come to its rescue.”

A sponsor for Nova was announced tonight, which is good news. However, it falls far short of looking like a setup that will provide enough jobs now, and thus the plan is less than what we could call encouraging, and the details we’ve seen so far leave us wondering what sort of further offers might follow through, if any are even going to be possible from this point.

As the Nikkei predicted, Nova’s first announced sponsor is not a listed firm. It is privately held G.communication of Nagoya, which is a Kabushiki Kaisha that is 74.35% held by its founder and president, Masaki Inayoshi. According to his bio, Mr Inayoshi was born in Aichi Prefecture on July 3, 1969 and graduated from the faculty of literature at Aichi Gakuin University in 1992. He founded Gambaru Gakuen in 1994 and incorporated G Communications in 1996 (1997 according to the company information page).

Read more

Tough Monday for the Nikkei

It’s looking like it might be another tough week down at the Tokyo Stock Exchange. The Nikkei index slipped 5.3% last week, alongside the worldwide equity selloff prompted by the nosedive in Chinese stocks.

Bloomberg is reporting that Chicago futures contracts on the Nikkei are down to 16,865; As of 3pm, The Nikkei itself is down 575.68 points, to 16,642.25.

In a move that further seemed to spook investors, the yen suddenly made large gains against the dollar, moving to about 115.68, up almost 6 full points since February 23.

2006 Japan IPO Statistics

On his From the inside, looking in blog, Shin Fukushige has published some statistics on IPOs in Japan in 2006. Here’s what he found:

• Total number of IPOs: 188
• 20 failed to post initial prices above the subscription price
• 36 companies (or perhaps 37, depending on how eBASE does. The company listed on Dec 26th but has yet to trade in two days, buys outnumbering sells by approximately 30:1, and looks like the initial trades will occur at a level of PER>100) posted opening prices which translated to an initial price trailing PER >100
• Highest initial price PER was Drecom (Feb 9th), at 953.94
• 8 companies had initial price trailing PER<10, and a further 2 companies were loss-making for the most recent financial reporting period

Shin says that he’ll have more stats for us when he gets some time, so keep your eyes on his blog…

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