Plummeting Tokyo stocks on Wednesday drove the benchmark Nikkei index to another 19-year low as investors fretted over the absence of concrete policy steps to shore up the struggling Japanese economy.
The 225-issue Nikkei average dropped 169.56 points, or 1.95 percent, to close at 8,539.34 — its lowest finish since June 10, 1983 — after briefly slipping to 8,498.46.
The Topix index of all first section issues on the Tokyo Stock Exchange fell 16.50 points, or 1.92 percent, to 844.29 — its lowest closing level since Oct. 19, 1984.
Behind the fall was heavy selling pressure by foreign investors, notably U.S. and European pension funds, of key blue chip shares such as Toyota Motor and Hitachi. Domestic players, including life insurers, joined the action in the afternoon.
Market players sold shares in almost all sectors as they believe the government is acting too slowly to launch concrete measures to counter increasing deflationary pressure, despite Japan’s hard-nosed approach to tackling the bad-loan problem at banks, according to brokers.
Investors were disappointed by Prime Minister Junichiro Koizumi’s remark Tuesday that the government is not considering submitting a supplementary budget to the extraordinary Diet session that convenes on Oct. 18, the brokers said.
Koizumi’s comment led investors to suspect the government will aggressively promote the disposal of bad loans at banks without implementing shock-absorbing measures, thereby further damaging the shaky economy by triggering more corporate failures and a rise in unemployment.
“The market cannot wait much longer,” said Hiroaki Kuramochi, head of the equities department at Credit Lyonnais Securities (Japan). “The situation will only worsen if no action is taken.”
Kuramochi said players are expected to continue selling shares in companies saddled with heavy debts, which will likely send the Nikkei sliding further toward the 8,000 mark.
Trading was relatively light, with volume on the TSE’s main section at 749.03 million shares, down from 762.07 million Tuesday.
Declining issues overwhelmed advancers 1,179 to 210, while 101 issues closed unchanged.
Banks fell as concern mounted that they may be forced to swallow a sizable amount of nonperforming loans. Mizuho Holdings and UFJ Holdings slipped to their daily limits.
Mizuho Holdings, the world’s biggest bank by assets, was the most heavily traded issue by value and slid 21,000 yen to 173,000 yen. UFJ Holdings fell 19,000 yen to 175,000 yen.
Sumitomo Mitsui Banking, the volume leader for the day, fell 6 yen to 505 yen.
Mainstay technology and auto issues slumped despite rises in U.S. shares overnight and the steadiness of the dollar against the yen.
Hitachi, which fell to its lowest level since March 1982, ended 17 yen lower at 518 yen. Toshiba fell 13 yen to 304 yen after tumbling to a 19-year low.
Several other high-tech issues hit intraday lows for the year, including NEC, Fujitsu, Sharp, Nikon and Matsushita Electric Industrial.
Kyocera, Tokyo Electron, Advantest, Fanuc and Seven-Eleven Japan led the Nikkei’s decline.
Among notable gainers was Mitsui O.S.K. Lines, which rose 2 yen to 200 yen after a U.S. federal court halted a 10-day-old strike at some U.S. ports.
Other gainers included TDK, Tokyo Gas, Bridgestone and Secom.
U.S. stocks snapped a four-day losing streak Tuesday as investors cheered federal action on the port strike and solid earnings from companies, including soft-drink giant PepsiCo Inc.
The blue-chip Dow Jones Industrial Average rose 78.65 points, or 1.06 percent, to close at 7,501.49. The Nasdaq composite index rose 9.81 points, or 0.88 percent, to 1,129.21.