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Tokyo Stocks Plunge, Dollar Higher

December 3, 1997

TOKYO (AP) _ Tokyo stocks plunged for the second day in a row today as investors took profits from a four day rally. The dollar rose against the yen despite warnings from Japanese finance officials.

After some brief buying, the market faced a new round of selling because of continuing worries over the health of Japan’s economy, traders said. Uncertainties about an expected third economic stimulus package also prompted selling.

The benchmark Nikkei Stock Average of 225 selected issues fell 324.78 points, or 1.92 percent, closing at 16,585.51. On Tuesday, the average had declined 97.30 points, or 0.57 percent, following a gain of 7.2 percent over the previous four trading days.

The governing Liberal Democratic Party is scheduled to announce a third package of economic stimulus plans next week. Many investors avoided putting more money into the stock market ahead of the announcement, said Yoshiki Sugawara, investment information manager of Sanyo Securities Co.

``Investors are now beginning to think whether they should be so optimistic about what the LDP can offer at this point,″ he added.

Investors also want the government to make a concrete decision on the use of public funds to ensure stability in the financial system, and to specify exactly how they will be utilized, he said.

Declines outnumbered advances 965 to 197, with 111 issues unchanged. Volume on the first section was estimated at 460 million shares, down from Tuesday’s 563.2 million.

The broader Tokyo Stock Price Index of all issues listed on the first section was down 18.89 points, or 1.49 percent, to 1,251.19. It had slipped 4.36 points, or 0.34 percent, the previous day.

In currency trading, the dollar briefly touched the day’s high of 129 yen as investors bought it ahead of the release of Japan’s gross domestic product growth data, traders said.

In late afternoon, the dollar was trading at 128.72 yen, up 0.14 yen from late Tuesday in Tokyo and above its late New York level overnight of 128.64 yen.

Warnings from Japanese finance officials about the dollar’s recent rise temporarily pushed it as low as 128.30 yen, but Japanese interbank players bought it back at the lower price.

Earlier today, Finance Minister Hiroshi Mitsuzuka reiterated his warning that the government was ``ready to take action on the weak yen.″

Financial turmoil in Asia, especially South Korea, also kept many investors away from buying the yen, traders said, because the economies of Japan and South Korea are linked by close trade ties.

The government announced today that real gross domestic product rose 0.8 percent in the July-September quarter from the prior quarter, for an annual pace of 3.1 percent, leading analysts to believe the risks of a full-blown recession are growing.

The yield on the benchmark No. 182 10-year Japanese government bond fell to 1.640 percent from Tuesday’s 1.715 percent, driving its price up to 109.38 yen from 108.83 yen.

Update hourly