Nikkei stock index tumbles to fresh 19-year low

Tokyo stock prices tumbled Monday, with the Nikkei index hitting a fresh 19-year low amid concerns over the negative effects of a plan to accelerate a banking sector cleanup and continued turbulence in world share prices.

The 225-issue Nikkei Stock Average dropped 339.55 points, or 3.76 percent, to close at 8,688.00, the lowest finish since June 16, 1983.

The Topix, which measures all first section issues on the Tokyo Stock Exchange, slid 31.13 points, or 3.49 percent, to 860.47, the lowest close since Nov. 28, 1984.

Investors dumped shares almost across the board after Financial Services Minister Heizo Takenaka said over the weekend that the government would let companies, including major firms, go bankrupt if their operations are found to be nonviable.

Takenaka made the comment in expressing his determination to speed up the disposal of bad loans held by banks.

“Mr. Takenaka should think twice before making such remarks,” said Masatoshi Sato, senior strategist at Mizuho Investors Securities Co. “I suspect the comments were lip service for people outside Japan, but he should remember that his comments have considerable impact on the market.”

At the TSE, declining issues overwhelmed advancers 1,412 to 53, with 24 issues closing unchanged. A total of 399 issues registered intraday lows for the year, the highest since Sept. 12, 2001.

Banks fell by more than 5 percent, hit by selling through foreign brokerages, partly on a Newsweek report quoting Takenaka as saying that no bank is too big to fail, including Japan’s four major banking groups.

Mizuho Holdings and UFJ Holdings hit year-to-date lows. Mizuho closed at 196,000 yen, down 16,000 yen, and and UFJ at 192,000 yen, down 26,000 yen.

Other major banks were also weak, with Sumitomo Mitsui Banking down 51 yen to 514 yen and Mitsubishi Tokyo Financial Group slumping 63,000 yen to 781,000 yen.

Sumitomo Mitsui was the volume leader for the day and the most heavily traded issue by value.

Construction firms and retailers — many of which are deep in debt — fell sharply, with issues including supermarket operator Daiei and midsize general contractors Kumagai Gumi and Maeda Corp. hitting intraday lows for the year.

Brokers said they saw few buy orders in the market as players were shifting their attention to a fresh economic package aimed at stemming deflation, which is expected to be unveiled next week.

“The government must soon launch drastic measures to ease deflationary pressure in the economy and to prompt investors to shift their attention to the stock market,” said Hiroichi Nishi, equity general manager at Nikko Cordial Securities Inc.