Japanese Shares Slide as New Government Vows to Balance Books


In Asia Tuesday the Nikkei 225 Index fell 1.2% to 10,113 and the Hong Kong Hang Seng dipped 0.4% to 20,819. In China the Shanghai Composite added 0.1% to end the day at 2,589.

Japan's new government has vowed to balance its books over the next 10 years. According to a document released today, annual spending will not exceed 71 trillion yen ($781 billion) for the next three years, reports Bloomberg. Fear of a Greek-style crisis has spurred Prime Minister Naoto Kan's new cabinet to focus on decreasing the country's debt, which has mounted as the country tried to spend its way out of a 20-year stagnation period. As a result, the country has the highest government debt of any industrialized country, according to a report on BBC World Service, and the country's debt is now estimated to be about double its GDP.

Japanese citizens should expect big changes, including tax hikes in many areas. According to Reuters, one newspaper survey showed that nearly half of the respondents would back a sales tax of 10% -- that's double the current 5% sales tax. "We can see from the Euro Zone confusion that began in Greece that our finances can go bankrupt if we don't address our rising public debt," Kan said during his inaugural address earlier this month.

Another drop in the euro sent shares in exporters lower. Tokyo Electron plunged 3.6%, Sony tumbled 3.2%, Canon plunged 2.7% and Clarion, a maker of car audio systems, fell 2.5%. Fanuc, an industrial robot maker that's recently surged on predictions of increased orders from China, slumped 3.3%.

Mitsui & Co., a major trading house dealing in everything from metals to food and energy, lost 2.9%, and even Nintendo, which has been skyrocketing on high hopes for the super-cool new 3DS coming later this year, sank 3.3%.

In Hong Kong, cell phone makers closed lower after worker strikes paid off with higher wages. Foxconn, the maker of iPhones and iPads and other high-tech devices, fell 3% and VTech, the maker of cordless phones and noisy educational toys, dropped 2.2%. Both companies say they are investing in automated factories in light of the new minimum wage requirements, says Bloomberg.

Gainers in Hong Kong included those with major real estate holdings. Wharf, which owns the giant Ocean Terminal shopping mall as well as the iconic Star Ferry, which brings passengers directly to the mall's front door, increased 2.1%. Swire Pacific rose 1% and Cheung Kong advanced 0.8%.

Tencent, an Internet and telecom service provider doing business in China, slumped 4.7%.

In China, automakers rose on expectations that a stronger currency will increase revenue by reducing the price of raw materials needed for production, despite the fact that the newly untethered yuan lost 0.2% today. Tianjin Faw Xiali Automobile surged 4.5%, FAW Car climbed 2.2% and Beiqi Foton Motor added 0.5%. But even with higher wages on the horizon, it will still be a stretch for those earning under $200 per month to upgrade from bikes to cars.