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Tokyo Stocks Close Higher

May 26, 1998

TOKYO (AP) _ The dollar hit a seven-year high today against the yen, a currency made unattractive by miserable returns in Japanese financial markets. Tokyo stocks ended higher.

The dollar bought 137.68 yen in late afternoon, up 0.54 yen from late Monday in Tokyo. During the day, the dollar traded between 137.05 and 137.73 yen _ its highest level since August 1991.

U.S. financial markets were closed Monday for the Memorial Day holiday.

With Tokyo’s stock market mired in an eight-year rut and the yield on bonds hitting all-time lows, Japan’s mutual fund managers have been dumping yen for dollars in search of higher returns in red hot U.S. markets.

Purchases of U.S. assets by Japanese investors, who already own $873 billion worth of overseas stocks and bonds, have picked up recently even in the face of warnings of an imminent correction on Wall Street, traders said.

``There is a lot of buying demand from (Japanese) trust funds,″ said Takeshi Chujo, a currency dealer at the Tokyo branch of Banque Paribas.

Part of the reason for the shift is growing pressure on fund managers here to improve returns. Financial deregulation has opened the doors to U.S. and other foreign asset managers, who in April took in more money than Japanese-run funds for the first time ever, the Nihon Keizai business daily reported Monday.

Foreign investors have also fled Japan amid disappointment with Tokyo’s efforts to revive its economy. While the yen rallied briefly last month when Japan announced a $121 billion stimulus package that included temporary tax cuts, the optimism quickly faded as the government failed to make those cuts permanent.

Nor do the world’s central bankers appear too worried about the yen’s slide. The latest issue of U.S. News and World Report magazine touched off a wave of dollar buying Monday when it quoted U.S. Treasury Secretary Robert Rubin as saying he is willing to let the yen weaken further, even as far as 150 to the dollar.

Rubin later said U.S. support for the yen was unchanged, and Tokyo trading rooms were buzzing Tuesday with talk of possible intervention by Japan’s central bank to prop up its currency. But traders said that even if central banks intervened, that wouldn’t change the fundamental cause of the yen’s weakness: Japan’s decrepit economy.

``Intervention remains a strong possibility,″ said Kazuteru Hasegawa, head of foreign exchange sales at Bank of America in Tokyo. ``And it would drive the dollar down. But two or three days later, we’d be back here again.″

On the Tokyo Stock Exchange, share prices ended higher, led by blue-chip exporters such as Sony Corp., TDK Corp. and Sega Enterprises Ltd.

The 225-issue Nikkei Stock Average rose 101.70 points, or 0.64 percent, closing at 15,884.82. On Monday, the average slipped 18.53 points, or 0.12 percent.

Sony and other exporters gained as the rising dollar is expected to boost earnings by making their products cheaper overseas.

Trading was sparse, with an estimated 280 million shares changing hands on the first section, down from 292 million Monday and well below Friday’s 410 million. Advancing issues outnumbered decliners 3-to-2.

The broader Tokyo Stock Price Index of all issues listed on the first section was up 5.51 points, or 0.45 percent, to 1,232.22. It had slipped 3.48 points, or 0.28 percent, the previous day.

Meanwhile, the yield on the benchmark No. 182 10-year Japanese government bond rose to 1.225 percent from Monday’s 1.215 percent, driving its price down to 111.91 yen from 111.99 yen.

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