Nomura Is Latest Blow in Japan's Terrible Year: The Ticker

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By William Pesek

For Japanese, 2011 can't end soon enough.

A quick tally of this year's misfortunes: the March 11 earthquake and tsunami, a still-unfolding radiation crisis that's devastating tourism, the resignation of the fifth prime minister in as many years, a surging yen, Thai floods derailing factory production and credit downgrades.

Here’s one more woe to add to the list: Nomura Holdings Inc.'s shares tumbling to the lowest in 37 years. Yesterday's plunge provided a much-needed reality check on how Europe's escalating debt crisis is homing in on Asia's biggest names.

Japanese shares are falling for other reasons, too. Olympus Corp.’s admission yesterday that it hid losses dating back to the 1990s sparked concerns about Japanese corporate governance. Also, worsening floods in Thailand are causing serious headaches. They were partly behind Toyota Motor Corp.'s move to scrap its profit forecast.

Yet the European crisis is closing in on Asia. A week ago, investors in this region were cheered by Europe's move to boost the firepower of its rescue fund to 1 trillion euros ($1.4 trillion). Political dramas in Greece and Italy since then reversed that confidence.

Whereas many in Asia agree Greece's economy is too big to fail, Italy's may be too big to save. The surge in 10-year Italian debt yields toward 7 percent is the talk of Asian markets. It's prompted an intensive search to discern which Asian brokerages are harboring heavy euro-zone exposure.

Nomura's euro holdings hardly seem debilitating. It had net exposure to Greece, Ireland, Italy, Portugal and Spain totaling $3.6 billion as of Sept. 30. And yet, Japanese brokerage shares are plunging.

All this counters the view that Asia is insulated from the European storm about to rain even more volatility on world markets. Governments from Tokyo to Jakarta need to be ready for the fallout from Global Financial Crisis 2.0. If Nomura's selloff tells us anything, it's that Asia isn't as immune to events in Athens and Rome as once thought.

That's a sobering thought as Japan's dismal 2011 limps into a potentially turbulent 2012.

(William Pesek is a Bloomberg View columnist.)

-0- Nov/08/2011 16:33 GMT