TOKYO/WASHINGTON -- Pessimistic observations that stock prices have yet to bottom out are prevalent among experts after the Nikkei Average of 225 selected issues at the Tokyo Stock Exchange fell over 1,000 points on Dec. 25, ending below the 20,000-point level.
Investors are increasingly wary that the world economy will slow down as U.S.-China trade friction has been prolonged. Uncertainty over the way U.S. President Donald Trump manages his administration has also amplified investors' concerns.
"The slowdown of the world economy has just begun. In the short term, there will probably be occasions when share prices will rebound. However, a situation in which it remains uncertain how far share prices will decline will continue," said chief market economist Yasunari Ueno of Mizuho Securities Co.
In addition to the slowdown of the U.S. economy, indexes in China and the euro zone have worsened, Ueno pointed out. He said that since concerns that surplus money flowing into stock markets may end are prevalent among investors, it is hard to predict when share prices will bottom out.
Seiichi Miura of Mitsubishi UFJ Morgan Stanley Securities Co. shares the view that it is difficult to predict how far share prices will fall. He pointed out that investors are "worried that they may suffer unpredictable amounts of losses and sell off blue chip shares."
Yoshimasa Maruyama of SMBC Nikko Securities Inc. said he is of the view that the world economy will still continue expanding, noting that the U.S. government will likely increase its spending until mid-2019.
"The world economy is on an expansion track, although the growth rate is lower than previous years," he said.
Still, there are no signs that the U.S. president will soften his tough stance toward China in bilateral trade talks. Moreover, Trump repeatedly criticized the Federal Reserve Board for raising interest rates. Due to these negative political factors, Maruyama said the Nikkei Average at the TSE could decline to around 18,500 points over the next three months.
However, there are some experts who point out that shares are being excessively sold off. There are actually some economic indexes in the United States showing that economic conditions, including employment, are brisk.
Noting that the world economy is not worsening, Hikaru Sato of Daiwa Securities Co. said the Nikkei Average "will bottom out at the 19,000 point level.
However, pessimism prevailed in stock markets less than three months after the Nikkei Average hit a post-bubble high in early October. Investors are expected to react nervously to the U.S. monetary policy and political situation.
The Japanese economy has expanded for about six years, but the growth has been aided by a recovery of the global economy including in the U.S. and China. However, there are growing concerns that an intensifying conflict between Washington and Beijing over the arrest of an executive of Huawei Technologies Co., a leading Chinese telecom equipment maker, will adversely affect the world economy.
While it is clear that the Chinese economy is slowing down, President Xi Jinping fell short of mentioning specific economic stimulus measures the government will take in a speech to commemorate the 40th anniversary of the launch of the country's economic reform policy on Dec. 18. This also made investors pessimistic.
Masatsugu Asakawa, vice minister of finance for international affairs, said the ministry will take necessary measures if market fluctuations further increase.
(Japanese original by Mamoru Ohara and Satoko Takeshita, Business News Deparetment, Masahiro Nakai, North America General Bureau)