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Japan stocks end worst-ever year

Analysts predict the market could face more pain in the new year as the world reels from the worst financial downturn since the Great Depression.

The Nikkei ended at 8,859.56 points as it closed out the year with a half-day session. The stock market reopens on January 5.

The year’s fall was the worst in percentage terms since the index was established in 1949.

“It was a year beyond our imagination,” said Kazuhiro Takahashi, an analyst at Daiwa Securities SMBC.

Global markets, already reeling from a credit crunch, went haywire in September when Wall Street titan Lehman Brothers went belly up under a mountain of debt.

The Japanese market repeatedly posted some of its biggest ever rises and falls. In October, the Nikkei plunged to a 26-year low.

“No one could stop the massive negative chain of events,” Takahashi said.

“First we thought it was a matter of the financial industry, but it quickly spread to the real economy around the world,” he said.

In 2008, shares were hardest hit in the auto sector with all of Japan’s carmakers drastically cutting their earnings forecasts due to falling demand in the United States and Europe as well as a soaring yen.

Shares in auto leader Toyota Motor Corp.—a year ago a pillar of the Japanese economy—lost half of their value in the course of the year.

The falls were even more dramatic for some of their competitors such as Nissan Motor Co. and Mazda Motor Corp. as well as for some major Japanese exporters.

Shares in Sony Corp. tumbled 69.0 percent in 2008, while top bank Mitsubishi UFJ Financial Group was down 47.56 percent.

While 2008 was the worst-ever year in percentage terms, the Nikkei suffered a bigger fall in points in 1990 with the end of Japan’s bubble economy, shedding 15,067.16 points or 38.71 percent of its value.

The market at least ended 2008 on a positive note, rising 112.39 points or 1.28 percent in Tuesday’s abbreviated session.

The broader Topix index of all first-section shares ended the year down 41.77 percent at 859.24. For the final session of 2008, the index rose 4.47 points or 0.52 percent.

Dealers said the market was optimistic about upcoming economic stimulus plans as US president-elect Barack Obama prepares to take over on January 20.

Dariusz Kowalczyk, chief investment strategist at CFC Seymour in Hong Kong, expected the market to rise later in the year. He predicted the Nikkei would grow 27 percent in 2009.

Dealers said Japan could also benefit from greater political stability in 2009. General elections must take place by September, with polls showing the opposition in a strong position to win—an outcome that would end a divided parliament in place since mid-2007.

But Takahashi warned that Japan still had a long way to go before lifting out of its recession, with the auto industry’s woes leading to higher unemployment and dragging down the entire economy.

“We may be able to see a temporary rebound in the middle of next year thanks to stimulus measures taken by major economies, led by the United States and China,” he said.

“But the impact could be shortlived. We can’t be optimistic. It will take more time to see a sustainable recovery.”