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Nikkei, Dollar Down

October 4, 1990

TOKYO (AP) _ Tokyo markets calmed slightly today after two days of feverish activity. Share prices on the Tokyo Stock Exchange closed sharply down and the dollar fell against the yen.

On the Tokyo Stock Exchange, the 225-issue Nikkei Stock Average lost 571.20 points, or 2.56 percent, to fall to 22,278.19 points. The average shed 49.04 points in heavy trading on Wednesday after a record surge the previous day.

Trading was thin, with about 320 shares, or about half of Wednesday’s volume, changing hands in the first section.

Many players stayed away to avoid the effects of arbitrage trading by major securities houses, said Amy Yip, manager of sales for Baring Seucrities.

″Today was a relatively quiet and stable (cash) market, although it drifted down″ on ″very, very thin activity,″ she said.

″The markets are waiting to see the employment report from the United States,″ said Yoshiro Inoue, an analyst for Nomura Securities. The September employment report is due out in Washington on Friday.

Other influences included the fall on the New York stock market overnight, and generally rising oil prices. Benchmark North Sea Brent crude for November delivery was notionally valued at about $36.30 $36.40 a barrel this afternoon in Tokyo, compared to the $36.35 level seen late Wednesday in New York.

Some analysts saw the market turning up, but only temporarily.

″We expect to see the market fall below Monday’s low sometime in the first quarter of next year,″ said Pelham Smithers of Shearson, Lehman Hutton Asia Ltd.

On Monday, the Nikkei index fell as low as 19,781 points.

″We don’t feel that the damage done to the economy has become apparent yet,″ Smithers said. ″Furthermore, the effect of people selling margin positions in November and December will have a negative effect on the market.″ Damage to the economy probably will show up in slower growth, with profits contracting later in the year, he said.

Higher oil prices alone will not hurt the economy greatly over the short term, said Tsutomu Toichi, research coordinator and chief economist for the independent Institute of Energy Economics. What would really hurt is higher prices over the long term, or worse, disruption of supply.

″The key is how long the high prices continue: For one year, two years, three years? If the high prices continue for four years, then the Japanese economy can cope,″ Toichi said. ″But the world economy will be so severely damaged (and that) will have an impact on the economy.″

Oil prices would not stay high beyond two years, at most, and might benefit the economy in the long run by improving incentives to conserve energy, he told reporters in Tokyo. ″But if the oil import quantity declined, that would affect the Japanese economy,″ he said.

Toichi said continued high prices also would probably aggravate stock market jitters.

On the currency market, meanwhile, the dollar closed at 135.90 yen, down 0.75 yen from Wednesday’s close. Trading ranged between 135.65 yen and 135.98 yen, after opening at 135.88 yen.

Today’s opening was the lowest in 14 months. In the morning traders said the dollar slid in reaction to comments by U.S. Federal Reserve Chairman Alan Greenspan indicating that U.S. interest rates might fall.

Greenspan said Wednesday that the proposed U.S. budget would ″almost certainly″ depress interest rates.

He told a Congressional committee that failure to approve the budget’s $500 billion deficit-reduction package would be a ″grave mistake″ with serious consequences for an already weakened U.S. economy.

In bond dealings, the yield of the benchmark 10-year government bond fell to 8.290 percent by 3 p.m., down from 8.310 percent on Wednesday. The price rose to 82.40 yen, up from 82.32 yen on Wednesday.

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