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Asia The Nikkei Financial Daily – November 10, 1997

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November 10, 1997

9700 might be seen in the Nikkei Average

Chairman of a leading U.S. fund management company says Yen’s depreciation is likely to progress to 145

(London: Mr. Shimizu)

Mr. Martin Armstrong, Chairman of Princeton Economic Institute, Inc., a leading US fund management company, pointed out to a reporter for Nihon Keizai Shinbun that domestic and overseas investors will intensify their selling of Japanese stocks. It is very likely for the Nikkei Average to decline to 9700 in May/June next year.

Near-term for the Nikkei Average, Mr. Armstrong told that it is likely to decline to 14,000 in a few weeks time. His analysis of Japanese domestic investors’ behavior shows a strong need among Japanese banks to liquidate their political cross-holdings of shares, of which the Bank of Yokohama’s determination is merely a beginning. Further, he warned that the Japanese government’s resistance of drastic tax and administrative reforms will increase foreign investor’s distrust of Japan to spur on their selling of Yen and Japanese stocks.

He said that the Yen could decline to 127.00 – 130.00 within two to five weeks from now and will decline to at least 145 during the next year. He forecasts that the Yen’s depreciation will reduce the value of Japanese stocks in terms of foreign currencies, causing further overseas investor selling of Japanese stocks.

Mr. Armstrong, however, told that a big fall in Japanese stock prices drives Japan into a serious crisis for the short-term, but could be the stock therapy required for the government to take desirable action for the long-term. Mr. Armstrong handles management of Princeton funds.