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2008年10月10日 (金)


2008/10/10 --The Asahi Shimbun, Oct. 9(IHT/Asahi: October 10,2008)

EDITORIAL: Crash in stock markets


A tidal wave of panic selling is depressing stock markets all over the world. The benchmark stock indexes in both the Japanese and the U.S. markets fell to levels well below the 10,000-mark, while markets in Europe and elsewhere in Asia also nosedived.


Late last week, the U.S. Congress finally enacted a financial bailout plan that allows the government to buy distressed assets from financial institutions. But markets reacted skeptically, questioning the effectiveness of the rescue package and urging the government to inject taxpayer money directly into troubled financial institutions. Europe also is struggling to come up with effective responses to the crisis that is now threatening the region's banking system.


The global stock market debacle indicates extremely heightened levels of anxiety about the financial system among investors and market players across the world. Furthermore, market participants predict a further global economic downturn in days to come. In a concerted move to stop the spreading downward spiral, six Western central banks, including the U.S. Federal Reserve Board and the European Central Bank, lowered their benchmark policy rates Wednesday.


As a result of the combined recession Japan experienced in the 1990s following the collapse of stock and real estate market bubbles, banks saddled with massive bad loans tightened up their screening for businesses and even called in loans, thereby making the recession worse and causing their own bad assets to increase further. This vicious cycle, in which a financial crisis weakened domestic demand and thereby worsened the crisis itself, pushed the nation deeper into recession.


The synchronized stock market tumbles ominously suggest the crisis that originated in the United States and Europe is developing into a global combined recession.


In the United States, the financial storm that started on Wall Street has begun to drag down the real economy. U.S. vehicle sales in September plunged 26 percent from a year earlier.

Lenders are now beginning to shut off lines of new credit to consumers as well as to businesses. Many American consumers have been sustaining their brisk shopping pace with borrowed money. The current credit crunch could lead to a sharp drop in consumer spending in the country.


Europe is also suffering a vicious cycle involving a downturn in the real estate market, a credit contraction and an economic decline.


The ripple effects of the crisis will also deliver a severe blow to Japan, which has pulled itself out of the prolonged post-bubble economic malaise on the back of strong exports of automobiles and electronic appliances. While overseas demand for Japanese exports is weakening, there is no quick way to stoke demand at home.


Japan first responded to the combined recession with massive rounds of simple public spending to boost demand, delaying cash injections into undercapitalized banks. The upshot was the now-famous "lost decade," in which a credit contraction and a deflationary downturn reinforced each other in a vicious cycle.


At a news conference on Tuesday, Bank of Japan Governor Masaaki Shirakawa said the lesson of Japan's bitter experience is that there can be no economic recovery under such circumstances without fixing the problem of undercapitalized banks.


The U.S. and European authorities must protect their banking systems and end the credit crunch to prevent a toxic combination of a contraction in lending and an economic downturn. That requires bold moves to infuse the banking system with public funds.


The British government on Wednesday announced a rescue package for its embattled banks that will inject up to 50 billion pounds (some 9 trillion yen) of taxpayer funds into troubled lenders. Other countries are also considering similar measures. As a country that underwent a severe home-grown banking crisis triggered by the burst of its asset-inflated bubble, Japan should strongly urge other countries facing a similar crisis to take these steps.


The nation's top financial policymakers will have an opportunity to do so when they attend a meeting of the finance ministers and central bankers of the Group of Seven industrialized nations this weekend.



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