Three scenarios

Article Abstract:

Corporate restructuring will affect Japanese stock prices, as well as government spending and tax policies, according to Goldman Sachs. Profits will be affected if companies decide against restructuring, while gradual restructuring, coupled with deregulation, should help remove excess capacity and improve profitability. Conditions could initially become more difficult, which would affect stock prices, but there would be a medium term improvement. A hard anding would occur if companies had no choice but to restructure due to global deflation.

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Teetering on the brink

Article Abstract:

Japanese stock prices dropped in 1997 and there is concern about a possible bank collapse in 1998. Falls in stock prices affect the capital stuctures of banks, which see their equity holdings drop in value. Japanese corporate and consumer confidence are at low levels, and there is pessimism about the government's ability to improve the situation. A fiscal stimulus may be carried out in 1998 as the government realizes how serious the problem is. There is political uncertainty at a time when decisive state action is needed.

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No end in sight

Article Abstract:

Japanese stock prices have performed poorly in the 1990s, and there is concern that the Asian financial crisis could lead to worse problems in Japan. Falling stock prices mean that banks' capital ratios are undermined, and they may have to sell stocks, leading to further stock price falls. Goldman Sachs is among observers with some optimism about the Japanese market, and sees signs that fiscal easing could help the market, though corporate restructuring and other measures are also needed.

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