Stocks Fall, Dollar Bounces Back
TOKYO (AP) _ The key index on the Tokyo Stock Exchange erased its early gains and fell back Wednesday afternoon, discouraged by the dollar’s rebound against the Japanese yen.
The dollar closed at 158.50 yen, up 0.35 yen from Tuesday’s close of 158.15 yen. It opened lower, at 157.60 yen, and ranged between 157.50 and 158.50 yen.
The dollar rose as investment trust companies bought it for technical position adjustments following the currency’s downswing the previous day, dealers said.
Many investors, however, remained on the sidelines waiting for the market as a whole to show signs of buying, they added.
The 225-share Nikkei Stock Average lost 184.40 points, or 0.62 percent, ending the day at 29,440.28 points. The index regained 320.33 points, or 1.08 percent, at the end of morning trading. On Tuesday it lost 773.25 points.
Volume on the first section, where most blue chip stocks are listed, was a thin 500 million shares.
A Nomura Securities trader attributed the index’s afternoon losses to the yen’s weakness and an increase in the commercial paper (CP) rate by the Bank of Japan.
CPs are unsecured promissory notes for corporations, issued to provide short-term financing. They are sold at a discount and redeemed at face value, and their rates are considered a key indicator of short-term interest rate movement.
Higher interst rates tend to discourage stock investment.
In earlier trading, the Nikkei rose following the yen’s higher opening against the dollar, traders said.
″The yen plunged yesterday because of doubts about Group of Seven cooperation in supporting the yen, but its overnight gain overseas wiped out such fears among Japanese participants,″ said Katsuya Igarashi, a trader with New Japan Securities Co.
Bank of Japan Governor Yasushi Mieno said after returning from a meeting of financial authorities of the G-7 nations in Paris last weekend that they had pledged to intervene in currency markets to support the falling yen.
The G-7 is composed of Japan, Canada, the United States, Britain, France, Italy and West Germany.
But market analysts say some G-7 nations regard the yen’s weakness as Japan’s internal problem and are reluctant to help the currency rise unless Japanese financial authorities take further steps, such as raising domestic interest rates.
″Buying came in slowly but surely in the absence of major sell orders as the majority of market players now think that the market had bottomed out,″ Igarashi said.
However, he said the key to a stock market recovery is the yen’s stability.
Among the issues attracting investors were Mitsubishi Metal Corp. and Mitsubishi Mining and Cement Co., which Tuesday announced plans to merge.
The merger will link one of Japan’s largest smelters of nonferrous metals with one of its largest producers of cement.
The Mitsubishi Group, to which they belong, is the remnant of one of the three most powerful ″zaibatsu″ conglomerates that dominated Japanese industry before and during World War II.