The Tokyo Stock Exchange tumbled Friday, driving the benchmark Nikkei index to a 20-year closing low on growing fears that a military strike will be launched on Iraq.
The 225-issue Nikkei average slid 225.03 points, or 2.69 percent, to close at 8,144.12, its lowest finish since March 15, 1983, when it ended at 8,111.83.
It was the fourth straight session the key index closed lower.
The Tokyo Stock Price Index of all first section issues dropped 20.05 points, or 2.46 percent, to 796.17. It was the lowest Topix level seen since Aug. 9, 1984, when it closed at 795.44.
Stocks ended lower across the board as investor sentiment was dampened by concerns that a looming attack on Iraq will cast a shadow over the global economy, brokers said.
Meanwhile, Bank of Japan Gov. Masaru Hayami said the central bank is ready to inject further liquidity into the banking system to ensure financial stability in the event of a U.S.-led attack on Iraq or further falls in share prices.
The BOJ will take swift action to address possible risks to the economy if war breaks out, Hayami said, while expressing concerns over the weakness in the Japanese and U.S. stock markets and the continued rise in crude oil prices.
The Nikkei extended losses in the afternoon following a speech Thursday by President George W. Bush in Washington that led investors to believe the United States is on the verge of war, brokers said.
Bush said Iraqi President Saddam Hussein has not yet disarmed his country and the U.S. opposes the proposed continuation of U.N. inspections in search of weapons of mass destruction in the pariah state.
Investors unloaded shares to lighten their positions ahead of any outbreak of military conflict in the Middle East, said Norihiro Fujito, a senior investment strategist at Mitsubishi Securities Co.
Stocks, especially international blue chips, were also hit by slides in U.S. shares overnight. Honda Motor, Advantest, Sony, Tokyo Electron and Fanuc led the Nikkei’s decline. Sony, the most-heavily traded issue of the day in terms of value, ended 80 yen lower at 4,250 yen.
Chief Cabinet Secretary Yasuo Fukuda tried to allay investors’ concerns, saying that the plunge in stock prices does not accurately reflect the state of the Japanese economy.
“The real condition of the economy is not so bad. Stock prices do not reflect (it’s condition),” the top government spokesman told reporters.
As evidence he cited the government’s just-released January data on the current state of the economy, which showed a key index is above the boom-or-bust line of 50 percent for the first time in three months.
The stock plunge reflects the gloomy situation surrounding the global economy, including the U.S. stock market, Fukuda said. “We must closely watch” future stock price moves, he added.
But a downwardly revised earnings outlook from Intel Corp. compounded the concerns over the Iraq crisis and Wall Street declines, said Masatoshi Sato, senior strategist at Mizuho Investors Securities Co.
Semiconductor-related issues were negatively affected by Intel’s announcement Thursday that it has lowered its first-quarter revenue estimates on weaker-than-expected sales of flash-memory microchips.
The securities sector was the worst performing lot on Friday due to a news report that Nikko Salomon Smith Barney Ltd. — a unit of Nikko Cordial Corp. — is under investigation by the TSE and financial authorities for allegedly manipulating stock prices in setting up an exchange-traded fund last year.
Trading was relatively heavy, with volume on the TSE’s main section down to 896.35 million shares from Thursday’s 994.85 million.
The second section index fell 17.86 points, or 1.14 percent, to 1,544.47 on volume of 21.98 million shares. In Osaka, the near-term March Nikkei 225 index futures contract shed 230 points to 8,110.
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