2008 worst year ever on Japanese stock exchange

JAPANESE STOCKS finished their worst year ever yesterday, a year punctuated with market records as the global recession and the surging yen eroded company earnings.

The benchmark Nikkei 225 sank 42 per cent in 2008, eclipsing the next-biggest slumps of 39 per cent in 1990 and 27 per cent in 2000. The broader Topix index also had a record fall, with all but one of its 33 industry groups losing ground.

The slowdown bankrupted a record number of listed companies and pressed Toyota, the country's biggest company, to predict its first-ever operating loss.

"I've never experienced a year like this in my 23-year career," said Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management.

Separately daily newspaper Sankei Shimbun reported yesterday that Japan's government and central bank are considering a $110 billion scheme to buy bad loans and other financial assets from banks to ease a credit crunch gripping the country's businesses.

Such a scheme would come on top of Tokyo's efforts to keep the world's second-largest economy from sliding deeper into recession as the global credit crisis hurts exports and corporate funding conditions tighten.

The government and the central bank are hoping to implement the scheme by the end of March, buying various types of assets from banks including bad loans, corporate debt, stocks, commercial paper and derivatives products, the newspaper said without quoting sources. They may buy up to 10 trillion yen of these assets under the scheme, said Sankei, the smallest among Japan's five major newspapers with nationwide circulation.

Japan, like the US, is already in recession, with companies such as carmakers Toyota and Honda slashing output as customers close their wallets worldwide.

Any new asset-buying scheme would probably be an expanded version of a rescue plan during Japan's financial crisis in the late 1990s, when the government bought bad loans from banks through the Deposit Insurance Corporation (DIC), a government-affiliated institution, until 2005. An official at the DIC said that they had no knowledge about the matter and the Bank of Japan was not available for comment.

The authorities have already unveiled a series of measures to ease credit strains and rev up the economy as the fallout from the global financial turmoil spread.

The government has announced extra spending plans and its biggest ever budget for the next fiscal year, while the central bank cut interest rates to near zero and offered to temporarily buy commercial paper outright earlier this month, echoing some of the emergency steps taken by the US Federal Reserve.

Analysts, however, doubt whether buying bad debt would be as effective today as it was in the late 1990s, when Japanese banks were saddled with a huge pile of bad loans as a weak economy hurt companies, and while tumbling stock prices eroded banks' balance sheets. - (Reuters, Bloomberg)