Tokyo shares fail to rise

Selling, not buying, on the Tokyo Stock Exchange

The Japanese stock market fell on Thursday as traders ignored the cheerful mood that swept global stock markets and instead focused on the troubled domestic economy.

The US interest rate cut failed to cheer up Japan's equity traders

On a half day of trading, the first after an extended New Year holiday, the Nikkei 225 index fell 0.6% or 94.20 points to close at 13,691.49.

"No one really expected the index to move into minus territory today," said Nomura Securities analyst Tatsuo Kurokawa.

Pessimistic analysts said it would take a lot to turn the trend in Tokyo.

"Given the likely increase in the unwinding of cross shareholdings and profit-taking ahead of the end of the fiscal year, the Japanese market will not rise strongly," said BNP Paribas Securities chief strategist Koji Shimamoto.

Renewed recession fears

Late last month, statistics were released showing a surprise fall in industrial output in November.

The US Federal Reserve's prompt action to prevent the economy from falling into deep recession is well received, but this will not help much in the fundamentals

Marco Mak
Tai Fook Securities

The figures came as a blow to those hoping that Japan was continuing its recovery and might be able to avoid being dragged back into recession.

Figures released in December revealed that unemployment had risen to an eight-month high and retail sales had fallen for the 44th month in succession, despite a 1% decrease in shop prices that introduced fears of deflation.

Fears remained about the US economy's prospects also weighed on Nikkei traders minds, despite the cut in interest rates.

"The US Federal Reserve's prompt action to prevent the economy from falling into deep recession is well received, but this will not help much in the fundamentals," said Tai Fook Securities analyst Marco Mak.

Further dips in US economic growth would be bad news for Japanese exporting companies.

Nikkei's slide

Tokyo's Nikkei index ended 2000 27.2% below its year entry level, having fallen a massive 34% from the highs reached in March.

It was the first time since 1990 that the Tokyo stock exchange recorded an annual loss - during the year when Japan's economic bubble burst and property prices collapsed.

Elsewhere in Asia the surprise cut in US interest rates on Wednesday had created a buoyant mood among traders.

Most markets shot up, despite the gloomy mood in Tokyo.