The key Nikkei stock average on Tuesday closed below 7,900 for the first time in 20 years amid growing concerns about the likelihood of war in Iraq.

The Bank of Japan reacted by pumping 1 trillion yen into financial institutions through its money market operations. The central bank’s move is intended to support the banking system, which is becoming increasingly vulnerable to stock falls ahead of March 31 book closings.

The 225-issue Nikkei average lost 179.83 points — or 2.24 percent — to close at 7,862.43, marking its sixth straight day of decline and its lowest level since Jan. 25, 1983, when the index finished at 7,803.18.

The Nikkei also ended below 8,000 for the first time since March 1, 1983, when the benchmark finished at 7,988.85

The broader Tokyo Stock Price Index of all first section issues fell 13.90 points, or 1.77 percent, to 770.62, marking its fifth straight day of decline and its lowest level since the Aug. 1, 1984, close of 760.89.

After finishing the morning slightly higher on dip buying, stocks lost steam in the afternoon as investors unloaded export-oriented technology and automobile shares on speculation that a war in Iraq is imminent, brokers said.

“Investors are shifting their funds away from equities markets on a global basis,” said Masatoshi Sato, senior strategist at Mizuho Investors Securities Co.

Instead, investors are moving their money to safer places, such as the bond markets, he added.

The government vowed Tuesday to take decisive action to prevent stock prices from plunging further, but it failed to encourage investors to snap up shares due to the widespread belief that the measures are unlikely to be anything approaching the fundamental reform that is required, brokers said.

“Such measures are only seen as short-term solutions and just postpone the problems,” said Hiroaki Kuramochi, head of the equity department at Credit Lyonnais Securities (Japan). “Investors were disappointed that the government is not taking the situation as seriously as it should.”

The BOJ’s money-pumping operation in the short-term money market came after a similar operation Oct. 31, when Japanese financial markets were showing signs of serious instability.

The short-term money market is where financial institutions extend loans among themselves with maturities of up to one year.

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