An Analysis of the Recent Behavior of the Japanese Nikkei Stock Market Average
Tanis, Mark I.
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Since December, 1989, The Japanese Nikkei Stock Market Average has lost over 59 percent of its value. This translates into trillions of Yen in "paper profits" lost with this recent decline in Japan's Stock Market. This thesis depicts several contributing causes to The Nikkei's fall including the following: A changing stock market arena, the banking industry, blue chip companies, and a changing Japanese society. The Changing Stock Market Arena The Tokyo Stock Exchange is changing in at least four different respects. The lack of a formal bond market forces investors to exercise their warrants, driving down The Nikkei Average. The Nikkei is also trading at lower, more American, PIE ratios; resulting in a lower Nikkei. The Japanese brokerage houses are getting caught violating securities laws. And the entrant of American brokerage houses, the Japanese charge, causes the Nikkei to spiral. The Banking Industry The banking industry is another contributor to The Nikkei's fall. Banks made a tremendous number of bad loans, interest rates were kept too low during Japan's great expansion, and The Japanese Postal Savings System forced banks to make risky loans in order to compete.