Nikkei: The Road To 1982 And Back
Written by A Forex View From Afar on Monday, October 27, 2008The Japanese Nikkei tumbled 486 points overnight, falling to 7,162.90. So far this year, the Nikkei has fallen, in the face of the credit crunch, a little more than 50%.
The same level, 7,160 points, was last touched by the Japanese market back in 1982, when one of the biggest bubbles known to modern financial world was developing. The bubble continued until 1989, where it peaked at 40,000 points, more than 5.5 times today’s value.
In order to heal its wounds, the Nikkei retraced for 13 years, until 2003 when it fell to 8,400 points. At its peak, back in 1989, the earnings per share was standing at 70.00 compared with today’s 8.6..
On the macroeconomic scale, since the 1990’s, the Japanese economy has fought deflation and a fast ageing population. Due to the low inflation environment, the BoJ interest rates are already at a low level, 0.50%, leaving the central bank’s hands tied in the face of the global slowdown.
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