• Kyodo News

  • SHARE

Tokyo stocks fell sharply Tuesday, with the key Nikkei index briefly dropping below a 26-year closing low as investors were rattled after the Dow Jones index closed Monday at its lowest level in almost 12 years and fresh financial worries surfaced.

The 225-issue Nikkei lost 107.60 points, or 1.46 percent, to end at 7,268.56. In the morning session, it dropped to 7,155.16 — falling below a 26-year closing low of 7,162.90 logged last Oct. 27 — but later trimmed its losses on the dollar’s strength relative to the yen.

The broader Topix index of all first-section issues was down 5.00 points, or 0.68 percent, to 730.28, closing at its lowest level since Dec. 27, 1983.

Decliners were led by securities, consumer finance, and pulp and paper issues. Major gainers included rubber products and auto issues.

Brokers said stocks were dragged down after U.S. stocks slumped Monday on mounting pessimism about the future course of the U.S. economy, especially its financial sector.

The Dow Jones industrial average sank 250.89 points to 7,114.78, crashing below its November bear market low.

“The drop in U.S. stocks is the biggest reason behind today’s fall in Tokyo stocks,” said Yukio Takahashi, a stock market analyst at Shinko Securities Co.

“When you look into what caused stocks to fall, we see continued financial instability, with a (reported) massive loss at AIG and concerns about possible bank nationalization,” Takahashi said.

Anxiety about the U.S. financial sector was fanned by business channel CNBC’s report Monday that top U.S. insurer American International Group Inc. is set to post its biggest-ever quarterly loss and is negotiating with authorities for more aid.

The Wall Street Journal also reported in its online edition that Citigroup Inc. is in talks with federal officials that could result in the government owning up to 40 percent of the bank’s common shares.

“Concern is growing that instability in the U.S. financial sector may spread,” said Hiroichi Nishi, equities chief at Nikko Cordial Securities Inc.

Takahashi said, “Tokyo market participants adopted a tentative attitude ahead of (President Barack) Obama’s first speech to Congress to see how the U.S. financial markets will react to this.”

With the Tokyo market keeping close tabs on how U.S. stocks move, he said, “Investors cannot be assured (that New York stocks won’t fall sharply), because for the past Obama-related occasions, such as his inauguration, stocks were sold due to investors’ disappointment after the initial euphoria over Obama’s policies gradually wore off.”

Tokyo stocks managed to avoid a massive selloff thanks to the dollar’s rise to the lower ¥95 level.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.

SUBSCRIBE NOW