Nikkei toes 19,000 in fifth-largest loss

Share prices on the Tokyo Stock Exchange plunged across the board Monday following Friday’s free fall on Wall Street, with Japan’s key market gauge posting its fifth-largest one-day point loss.

The 225-issue Nikkei average dropped below the 19,000 level at one point before closing at 19,008.64, losing 1,426.04 points — or 7 percent — from Friday’s closing.

The broader Topix, which gauges all First Section issues, lost 101.24 points, or 6.12 percent, to end at 1,552.46, also posting its fifth-largest one-day point fall.

It was the Nikkei’s first closing below 20,000 in 16 trading days.

Meanwhile, the yen moved higher against the dollar, with the greenback changing hands at 103.35-103.38 yen as of 5 p.m. in Tokyo compared to 105.85-88 yen in late Friday trading here.

The dark cloud that hung over Tokyo’s markets is believed to be the result of the wait-and-see attitude adopted by the finance chiefs of the Group of Seven industrialized nations, who held one of their semiannual meetings in Washington on Saturday.

The G7 made no mention of Friday’s plunge on Wall Street, in an apparent attempt not to adversely affect markets when they opened Monday. The G7 comprises Britain, Canada, France, Germany, Italy, Japan and the United States.

In Japan, government officials tried to play down the effects of the morning tumble, with Finance Minister Kiichi Miyazawa saying the dive was expected following the U.S. stock plunge last week.

The Tokyo stock selloff “must be a reaction to New York,” he told reporters in the morning. “It was expected and I am not very surprised. Everyone must be watching how New York will turn out (later) Monday.”

Miyazawa said he is “not greatly worried” because the Japanese economy is showing “clear signs” of recovery.

Miyazawa, who attended the G7 meeting, denied that the turmoil in the Tokyo market was triggered by the G7 communique’s failure to mention the U.S. stock fall.

He also denied the G7 statement had triggered the rapid appreciation of the yen against the dollar Monday morning.

Unlike after the two previous G7 meetings, the statement issued following the latest round of talks did not mention concern that the yen’s strength could affect the Japanese economy. It instead called for international cooperation on currency policy in general terms.

“(The G7’s) beliefs regarding the yen are not particularly different from before, and we are ready to intervene whenever necessary,” he said, emphasizing Japan’s determination to stem an excessive yen rise by intervening in the market and selling yen for dollars.

Meanwhile, Chief Cabinet Secretary Mikio Aoki told a regular news conference that the government “will continue to monitor” trends in stock prices for the time being.

The top government spokesman said “it is a fact” that the economy has shown signs of recovery, and added that the sharp decline in the Nikkei average will not directly affect the timing of the next general election.

Prime Minister Yoshiro Mori has indicated that the state of the economy will be a key factor in his decision on the timing of the elections. Political sources have indicated the elections will probably be held in June.

However, some politicians appeared alarmed by the TSE’s nosedive, with the ruling Liberal Democratic Party’s policy affairs chief saying he felt the need for the government to take emergency measures, including an infusion of 1 trillion yen in public funds to stabilize stock prices.

Shizuka Kamei told reporters in the morning that he will discuss the issue of propping up the stock market with policymakers from the LDP’s two coalition partners, New Komeito and the New Conservative Party, after meeting with them later in the day.