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Market Mood on Upswing in Tokyo : Stocks: Good news and foreign money have been rolling in, but many investors remain cautious.


TOKYO — For months, a small Yamaichi Securities Co. branch on a busy corner in Tokyo's financial district had been all but ignored. Uniformed female clerks sat patiently behind the brokerage counter, vainly waiting for customers to take their chances on a stock market that had lost 60% of its value in three years.

Last week something had clearly changed. The customer service counters were still mostly empty, but throughout the day, people wandered into the office, crowding around an electronic sign board flashing stock prices. It was as if they expected something big to happen.

Carried along by a wave of good news, the Nikkei stock index has rallied more than 10% in the last two weeks, closing Friday at 18,788.70. At midday today, the Nikkei was up another 182.69 points to 18,971.39, its highest level since Sept. 10.

Japanese brokerage houses, which have been reluctant in recent months to push stocks after losing so much of their customers' money, are out pounding the streets again.

"The number of orders we are getting is up by 30% to 40% over last week," says Hirokazu Hiratsuka, a Yamaichi salesman. But customers remain cautious, he says, buying mostly the low-priced issues that sell for just $3 to $4 a share.

"It (the Nikkei) is going to go up in April, I really think it will," says Shojiro Itoh, an engineer who dabbles in stocks as a hobby. But like so many other investors who were drawn back into the market last fall only to be disappointed again, Itoh is biding his time. "There is plenty of time; there is no sense in jumping in now."

The good news has been rolling in. Newspapers have been filled with talk of a planned $120-billion government package to stimulate the sluggish Japanese economy. Falling interest rates have made bank deposits less attractive relative to stocks. And a Finance Ministry directive asking financial institutions not to sell stocks and pressuring public pension fund managers to plow more money into shares has helped erase fears of another steep plunge in prices.

The most dramatic rebound has been in the share price of telecommunications giant NTT Corp., which has doubled from its recent lows. Although NTT's share price is still less than a third of its high, the stock's rebound has been critical in giving renewed hope to investors. With 1.7 million shareholders, NTT Corp. is the most widely held stock in Japan.

Aggressive foreign buying of Japanese stocks last week seemed to confirm a growing sense that Japan's economy has hit bottom.

Yet Japanese investors remain wary. "They say Americans are buying shares so stocks will go up, but I don't know," says Kazuko Yamaho, an insurance saleswoman who stopped by to see how her shares were doing. "I'm going to wait until the market drops again before I buy."

Japanese institutional investors also remain skeptical of the current rally's ability to sustain itself and wonder if foreigners are really investing for the long term.

"It's very strange," says Yoshikazu Yanagisawa, general manager of securities investment at Kyoei Life Insurance Co. "Why are they (foreigners) buying, I don't understand it."

The current stock rally is timely for Japanese banks and insurance companies, which must record the value of their shareholdings as of Wednesday, the last day of the fiscal year. The higher the value of bank holdings, the more money the banks can loan to customers. "It's nice of the foreigners to drive up prices now at the year-end," Yanagisawa says.

But while the government's commitment to keeping a solid bottom under share prices makes another plunge unlikely, analysts doubt prices can rise very far.

"When you get close to the 20,000 level you're going to see a lot of selling," says Yanagisawa. Japanese corporations, which during the late 1980s put large sums in tokkin , or investment funds, have been disappointed with their returns and continue to liquidate them.

Insurance companies, which are by far the largest and wealthiest investors, have seen their stock portfolios shrink so much they are now avoiding the market. "We don't have the leeway we used to have," says Yanagisawa. "We are not in a position to take risks."

While there are signs that the Japanese economy has hit bottom, the number of borrowers unable to pay interest on their bank loans continues to rise, threatening the market with the possibility of a bank collapse. "The financial problems don't look as bad as they did, but they are far from solved," Yanagisawa says.

Nikkei's Rising Sun The Tokyo stock market has rebounded in recent weeks to its highest level since September, as some investors have begun to bet on a recovery for the Japanese economy.

March 26: 18,789

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