WHAT has happened in the Tokyo stock market in recent days proves the old adage that wishing something doesn't make it so.
For more than a year, government officials here have insisted that a four-year-old recession in Japan's economy has ended and that the world's second-largest economy is on the rebound.
"The market is saying, 'Uh-uh, it ain't going to happen,' " says Tod Wood, an economist at Baring Securities in Tokyo. " 'It's not going to happen this summer ... [or] this fall.' "
The Nikkei index of 225 key stocks traded in Tokyo has lost about 5.5 percent of its value in three days of trading. It closed on June 13 at 14,599.68, edging toward the bottom point it struck during the current recession - 14,309.41 on Aug. 18, 1992.
Most analysts here predict declines in weeks ahead, perhaps to the 12,000 level. A year ago, the Nikkei was at 21,500. "We're not sure where the bottom is right now," sighs Yuichi Matsushita, market strategist at Nikko Securities in Tokyo.
Many investment banks here have been revising their assessments of this economy's immediate future, and pessimism is finding a consensus. "Back in recession," says the headline on a June 2 forecast put out by Merrill Lynch & Co.
Evidence that Japan's economy is destined for renewed recession will complicate Prime Minister Tomiichi Murayama's agenda at the summit meeting of the world's seven leading industrialized nations starting June 15 in Halifax, Canada. The Japanese are already worried that other countries will berate them for their chronically oversized trade surplus with the rest of the world, and a shrinking economy is not likely to absorb more exports.
JAPANESE officials say they hope to win other countries' support in efforts to solidify the new World Trade Organization, which is now mediating a standoff between the United States and Japan over access to the latter's market for automotive goods.
The most immediate concern driving people from the Tokyo market is skepticism about the government's ability to help repair the huge bad-loan problem at Japanese banks. The country is still trying to repair damage caused by the burst of the "bubble" economy of the late 1980s, a period when asset prices - of everything from real estate to artwork - soared.
Banks were particularly hard hit when those prices collapsed. Many institutions still carry large portfolios of loans that will never be repaid. The assets used as collateral for these loans, in many cases, are worth a lot less than they once were.
On June 8, the government announced measures to address the problem but for the time being ruled out a large-scale infusion of public money. Earlier this year, officials put forward a plan to bail out two insolvent institutions, using taxpayers' money. But the banks selected were run by operators later accused of cultivating corrupt links to bureaucrats. The ensuing public outcry forced the government to put the plan on hold. Estimates of total bad bank loans go as high as $120 billion.
"Unless the bad-debt problem is solved," says Yoshio Terasawa, a former top executive at Nomura Securities who is now a politician, "I don't think there is any hope for the Japanese economy."
Another factor behind the market's decline is the rise in the value of the Japanese yen. It has hurt earnings at many corporations, prompting investors to sell shares.
The high yen value makes Japanese goods more expensive overseas. To keep prices competitive, Japanese exporters have had to trim costs and move production elsewhere. This trend, known as "hollowing out," hurts prospects for recovery. It means companies do not spend money to expand operations in Japan and creates anxiety among consumers who feel their income or their jobs may be cut.