• Nikkei closes down 11.4%
• Biggest single-day drop since October 1987
Justin McCurry in Tokyo
Japan's prime minister, Taro Aso, today dismissed the US bank bail-out as "insufficient", in the first real sign of a split among the world's richest countries on how to address the credit crunch and looming global recession.
"It was insufficient, and so the market is falling rapidly again," Aso said, as the Nikkei benchmark index plunged over 11%, wiping out gains made earlier in the week.
The Nikkei 225 plummeted 1089 points, or 11.4%, to close at 8458, its biggest single-day drop since the stockmarket crash of October 1987. The broader Topix index lost 9.5% to end on 864.
On Tuesday the Nikkei had leaped by almost 10% as investors reacted positively to government rescue packages in Europe and the decision by the US president, George Bush, to set aside $250bn (£145bn) of a $700bn bailout to buy shares in stricken US banks.
Today, however, the implacable normality of recent weeks returned, with markets across Asia tumbling quickly after a dramatic overnight fall on Wall Street and the release of data suggesting rough times ahead for the US economy at large.
The Dow Jones industrial average shed 733 points, or 7.8%, on Wednesday - its steepest drop since the week following Black Monday in 1987 and all but wiping out the dramatic gains seen earlier this week.
Statistics from the US Federal Reserve showed economic activity was weakening across the board, with consumer spending, which accounts for more than two-thirds of US economic activity, slumping in most areas covered by the Fed survey.
The 1.2% drop in US retail sales last month was the biggest in the years and almost double the 0.7% decline analysts had expected.
"The massive sell-off on Wall Street triggered another selling in Tokyo," said Kazuki Miyazawa, market analyst at Daiwa Securities SMBC. "But what really depressed the US and Japanese markets is growing fears of a global recession."
Though broadly supportive of the measures agreed by the US Congress earlier this month, Aso told MPs more action was needed, but did not elaborate.
Japan's banks have emerged largely unscathed from the credit crisis afflicting those in the US and Europe, but Tokyo has been stung into action by mounting stock market losses and the failure last week of Yamato Life Insurance, the first Japanese victim of the US mortgage crisis.
This week Japan announced a raft of measures to keep its smaller institutions afloat, including the possibility of injecting public funds into regional banks for the first time since the country's banking sector emerged from its own crisis several years ago.
On Tuesday Japan said it would relax restrictions on listed firms buying back their own shares and on buying stock during late trading in an attempt to support the stockmarket.
It has also pledged to contribute to coordinated action, possibly to include dipping into its $950bn in foreign reserves - second only to China's $1.9 trillion - to ease the flow of credit or take stakes in struggling banks around the world.
Last week the finance minister, Shoichi Nakagawa, raised the possibility that Japan would make a significant contribution to any rescue plan agreed by the International Monetary Fund.
Today Tokyo moved a step closer to passing a ¥1.8tn (£10bn) stimulus package aimed mainly at small and medium-sized firms.
Major Japanese exporters and financial firms were again among the biggest losers as the Nikkei headed for another day of record losses.
Toyota lost 9.3% to ¥3,310, while Honda dropped 10.2% to ¥2,115 and Sony by 12.9% to ¥2,320.
Mizuho, Japan's second biggest banking group, lost 12.7% and the country's largest brokerage, Nomura Holdings, shed 14%.
Elsewhere in the Asia-Pacific, Hong Kong's Hang Seng dropped more than 6%. Indices in Australia, South Korea and Singapore suffered similarly dramatic falls.
TrackBack URI for this entry
Subscribe to this comment's feed
| < Prev | Next > |
|---|