Investors in Japan were in an unforgiving mood Monday, a day after Prime Minister Junichiro Koizumi's ruling coalition scored a strong victory in an election for the upper house of parliament. The Nikkei average closed at a new 16-year low after the release of poor industrial production data.
A day after Prime Minister Koizumi's governing coalition did well in an election for the upper house of parliament, the ministry of economy said industrial production fell twice as much as expected in June. It dropped 0.7 percent from the month earlier. It was the fourth straight month of decline, and economists immediately warned companies will have to slash jobs to survive.
The news was a stark reminder to Japan, especially to the winners in Sunday's election, that the country's economy is in trouble and on the brink of its fourth recession in a decade.
Monday, government spokesman Yasuo Fukuda underscored the government's commitment to the radical economic reform agenda of Prime Minister Junichiro Koizumi. The plan includes curbing wasteful public spending and writing off billions of dollars in bad loans in the banking sector. He says the election results show people's high expectations of Mr. Koizumi's reform plan. He adds that it is the government's priority to proceed with it.
Mr. Koizumi's ruling coalition easily retained its majority in the upper house by securing 78 out of 121 seats in Sunday's poll. But, as soon as the stock market opened Monday, skeptical investors were quick to call for swift and dramatic change. The Nikkei average languished throughout the day and finally ended at a new 16-year low, 11,579. It lost almost two percent of its value.
Analysts interpret the drop as a demand for concrete measures to revive the ailing economy. They warn more bad news could be in store. A government report due Tuesday is expected to show unemployment hit a record five percent in June.