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The BBC's Greg Wood
"Japanese consumers aren't spending, it really doesn't look very encouraging here"
 real 28k

Monday, 12 March, 2001, 08:27 GMT
Japanese stocks plunge
Prime Minister Yoshiro Mori
Speculation is rife that Prime Minister Mori will resign
Stocks in Japan plunged 3.6% on Monday to their lowest level in 16 years.

The fall in the stock market followed confusion over whether President Yoshiro Mori would resign, a sharp fall on the Nasdaq last Friday and concerns about the economy.

Monday's fall came despite the better than expected growth figures shown by the release of Japan's latest gross domestic product figures.

In the last quarter of 2000, the economy managed to avoid a recession by growing 0.8%, slightly better than expected.

But the news failed to boost the stock market as Tokyo's blue-chip Nikkei-225 index closed down 456.53 points at 12,171.37.

It was the Nikkei's lowest finish since 23 April 1985, when it closed at 12,124.14.

Surprise growth

Economists surveyed by the news wire Dow Jones had forecast that the Japanese economy would grow at a slower rate of 0.6%.

In the third quarter of 2000, the economy declined by 0.6%. That had been the first quarter of contraction since October-December 1999.

Two successive quarters of contraction would have pushed the country into recession.

The growth in the fourth quarter has been attributed to a 6.8% increase in business investment since the previous quarter.

However, consumer spending - a key factor needed to drive the economy - dropped 0.6% for the quarter.

Previously consumer spending had merely been flat.

Fears of recession

Economists also remain concerned about the impact of the US slowdown on Japan, which sends many of its exports to America.

The Japanese economy minister Taro Aso said it was "hard to feel at ease" about the future of the economy.

"These figures aren't recessionary, but I think a recession is probably coming," added Peter Morgan of HSBC Securities.

Last week the Japanese government announced it would set up a private-sector investment fund to buy cross-shareholdings held by Japanese banks.

The plan was yet another attempt by the Tokyo government to reform the country's ailing banking sector and help boost the economy.

Rumours that Prime Minster Mori will resign remain rife. On Saturday, Mr Mori told parliament he would bring forward elections for the leadership.

Stock slide

The selling of Japanese technology stocks drove the decline on the markets.

In New York, the Dow Jones industrial average plummeted 213.63 to 10,644.62 on Friday.

The technology index Nasdaq slipped 5.3% to 2,052.78, its lowest close since 17 December 1998.

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See also:

09 Mar 01 | Business
Japan promises share buy-back
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