Rising Fears of a Double Dip in Japan

Last week, the Nikkei 225 took a bearish turn, falling below all three key moving average levels with a close below the 200-day MA.

The most selling pressure is coming from domestic institutional investors, who have dumped over JPY1 trillion of Japanese stocks since July, almost completely offsetting the JPY1.45 trillion of net buying by foreigners, who have turned net sellers in the last couple of weeks.

Recent pronouncements by Japan's newly installed DPJ-led government are spooking investors and Japanese CEOs. Some 40% of CEOs now fear a double dip in Japan's economic recovery, according to a Nikkei survey of 100 Japanese CEOs. Nearly 40% of these CEOs now see a "high to somewhat high" chance of a double dip in Japan's recovery, with over 69% seeing the impact of stimulus wearing off, over 38% seeing a negative impact from the strong yen and 36% blaming the possible double dip on the new government's policies.