JAPANESE STOCK PLUNGE RAISES FUNDING PROBLEMS
The massive plunge in Tokyo stock prices on
Tuesday could rob the Government of much-needed revenue to spur
Japan's economy, and may hurt banks' ability to lend abroad,
analysts polled by Reuters said.
    "The Japanese Government is depending on the sale of NTT
(Nippon Telegraph and Telephone Corp <NCCT.T>) shares for much
of its public spending budget," said Shigeo Suzuki, a deputy
general manager at the Industrial Bank of Japan.
    Japan had hoped to raise at least 5,000 billion yen from
the sale of 1.95 mln NTT shares on November 10.
    However, the 14.9 pct plunge in the Tokyo share index today
has made such plans look unrealistic, analysts said.
    "The government could defer the sale of NTT or they could
offer fewer shares," said Keikichi Honda, general manager of
economic research at the Bank of Tokyo Ltd.
    Honda said another possibility is that the underwriters
handling the NTT sale would have to pay the Government the
amount it expected to get and bear the brunt of any losses
themselves. "That is what underwriting means," he added.
    A Finance Ministry official confirmed that the government
planned to go ahead with its sale of NTT shares on November 10.
    Another possible effect of Tokyo's stock tumble would be to
seriously undermine the asset base of Japanese banks.
    The banks lend money all over the world and regard the
market value of stock holdings as assets, analysts said.
    "Japanese banks make loans using perhaps as much as 60 to 70
pct of the market value of their unrealised stock holdings as
assets," said Industrial Bank's Suzuki.
    There is also concern that Japanese companies, which have
invested heavily in Tokyo's stocks as their real business
declined over the last two years, have sustained heavy losses.
    "Many companies, mainly export-oriented companies, were
planning on selling their shares for a profit to reinvest in
real businesses as the economy begins to pick up," said one
analyst at a foreign brokerage. "That prospect now looks dim."
    But analysts said it is unlikely companies or financial
institutions will be bankrupted by losses in stock trading.
    "I don't think any company is so badly exposed in stock
investments," said a senior analyst at Nomura Research
Institute. "In terms of financial institutions, luckily the
rebounding bond market and currency markets are still
profitable," he added.
    The Nomura analyst said a 10 pct decline in Tokyo stocks
would be translated into a fall of about 0.2 pct in consumer
spending. Some 20 pct of Tokyo stocks are owned by individuals.
    Market capitalisation on the Tokyo Stock Exchange fell to
329,588 billion yen on Tuesday from 386,041 billion at Monday's
close.
    NTT shares ended 260,000 yen lower at 2.65 mln each, well
down from their peak of 3.18 mln in April.
 REUTER
