Stocks Fall Below 38,000 Mark, Dollar Gains
TOKYO (AP) _ The Tokyo Stock Exchange’s key index plunged below the 38,000-point mark today amid uncertainties over domestic politics and overseas developments.
The dollar, meanwhile, gained against the Japanese yen.
The Nikkei Stock Average of 225 selected issues fell 343.50 points, or 0.90 percent, closing at 37,951.46, the lowest since Dec. 12, when the index closed at 37,803.53.
The index lost more than 500 points by midafternoon but rebounded somewhat as institutional investors picked up issues that had fallen earlier, said Takahiro Makita, a dealer with Yamaichi Securities Co.
Makita said investors were discouraged by rumors about a politician’s possible arrest in an alleged insider trading case, as well as falling bond prices, the weakening yen, news about bombings in restive Soviet Azerbaijan, and the 53 percent plunge in Argentina’s stock market Monday, when it reopened for the first time in more than a week.
A drop in future bond prices ignited fears of higher interest rates, which discourage stock investment.
″Such discouraging elements sent Japanese market players off to the sidelines and made trading inactive,″ Makita said.
Volume on the first section was estimated at 500 million shares, unchanged from the previous day.
″To begin with, the market has been unstable ahead of the election. Such nervous trading could occur repeatedly until then,″ Makita added.
Elections for the lower house of Parliament are expected in mid-February, although the government has made no official announcement.
With the insider trading rumor and Soviet developments also affecting the yen, the dollar closed at 144.97 yen, up 0.45 yen from Monday’s 144.52-yen finish, despite central bank intervention to support the Japanese currency. The dollar opened at 144.25 yen, its low for the day, and ranged as high as 145.25 yen.
The dollar had gained 0.37 yen on Monday.
Today’s gain also came despite a cut in the prime lending rate by major U.S. banks. Lower interest rates tend to make a country’s currency less attractive to investors.
″The yen is getting weak because nobody wants to buy it now,″ said Akio Nakanishi, a trader with Daiwa Bank.
Nakanishi said the insider trader rumor began circulating before the morning closing at 11 a.m. (9 p.m. EST Monday) and market players sold the yen all at once.
″I thought the rumor was a little bit strange ... but it really affected the market,″ Nakanishi said, adding that investors felt the dollar was a safer investment.
The rumor concerned Hiroshi Mitsuzuka, a former minister of international trade and industry said to be close to a company president who allegedly offered stocks in a transaction that brought an $828,000 profit for an aide to former Prime Minister Yasuhiro Nakasone.
The Bank of Japan sold a few million dollars to support the yen and check the dollar’s rise, Nakanishi said.
The central bank does not comment on its currency market activities.
About $11 billion traded hands in spot trading, up from Monday’s $6.49 billion.