Tokyo's Slump

THE stock market turbulence in Tokyo underscores Japanese concerns about that nation's once booming economy.

Japanese investors, who have watched the value of their stock market plummet substantially since its high in 1989, fret about slower economic growth, which is resulting in lower corporate profits. Little wonder that the government just announced a $30 billion package to stimulate the economy and encourage investment.

Investors also note that some anti-Japanese sentiment is on the rise in Europe as well as North America, which could work against Tokyo's global export machine. Moreover, slower growth evident in Europe could hurt Japanese exports.

To date, Japan's market gyrations, and its slowing economy, have not translated into economic difficulties in the United States, although Japanese investment in the US is contracting. The giant US economy appears to be shaking off the remnants of recession, despite lagging unemployment statistics. But the unemployment rate is usually the last index to turn around in the initial stages of recovery.

The US stock market, to date, continues to roar ahead, pushing toward the 3,300 level on the Dow Jones industrial average.

Wall Street's gains in recent months have been impressive, with the Dow rising in spite of a littany of woes, including a drooping housing market, rising unemployment, and diminished retail sales. Part of the reason for the market gains involves bottom-line finances: Stocks have represented the only real money-making arena in the economy. Bank certificates of deposit and money market funds have been paying passbook rates. Precious metals are trading at generally low prices. Real estate is hardly a money maker.

Moreover, Wall Street tends to look far ahead. And for some time now the street has been signaling modest economic recovery.

The big question is whether the Dow will continue to rise in an expanding economy, as it did during a declining economy. Some market gurus believe that the huge run-up in the Dow in recent months will lead to a correction of up to 10 percent. But even a momentary dip wouldn't necessarily end the bull market. Traditionally, stock markets rise in election years, as Washington tries to boost the economy and aid prospects of incumbents.

Washington, and Wall Street, will want to continue to monitor the movements of the Tokyo stock market with care. But both sides of the Pacific can be relieved that, up to now at least, the troubled Tokyo stock market and the currently rising US market are not linked.

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