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Monday, 30 July, 2001, 05:22 GMT 06:22 UK
Markets fall after Koizumi's victory
Prime Minister Junichiro Koizumi
Koizumi has promised radical economic restructuring
Poor industrial output figures pushed Japanese stock markets and the yen down despite the comfortable election victory of Prime Minister Junichiro Koizumi's government.

The ruling coalition won on a platform promising harsh economic reforms that Mr Koizumi said would be explained in detail after the election was over.

But as he celebrated the victory, industrial output figures for June were released showing a fall of 0.7% from May, compared with earlier forecasts of a 0.3% rise.

That pushed the Nikkei 225 index of leading shares down 203 points to 11,594. The yen fell to an eight-day low against the dollar of 124.7.

Koizumi's challenge

Mr Koizumi's victory in the elections for the upper house of parliament show there is broad support for his promise of harsh economic and fiscal reforms.

But since Mr Koizumi coalition government was elected in late April, there has not been any restructuring of the world's second largest economy which has been in a decade-long slump.

The financial markets will be watching to see if he returns to traditional Japanese policies of emergency budgets or takes a new tack.

Output figures

"June industrial output fell 0.7%, its fourth consecutive month of decline," the Ministry of Trade & Industry said.

"Production is on a downward trend," it said. "We must monitor the situation carefully."

Output by industry would decline 2.3% in July but rise 3.4% in August, the government forecast.

The stock market fell on speculation that Mr Koizumi's reform package includes plans to force banks to write-off bad debts and slash government spending on costly public works projects.

One upshot might be an increase in unemployment, which is already at a record high of 4.9%.

Seijiro Takeshita, Senior strategist at Mizuho Int.
"I think the Japanese Government's predictions are far too optimistic"
Standard Chartered Bank's Razia Khan
There is still a lot of uncertainty"
See also:

29 Jul 01 | Asia-Pacific
Japan's Koizumi secures victory
29 Jul 01 | Business
Can Koizumi save Japan?
18 Jul 01 | Business
Japan to reveal economic plan at G8
16 Jul 01 | Business
Gloomy outlook for Japan
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