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Dollar Lower in Tokyo Trading

February 4, 1998

TOKYO (AP) _ The dollar drifted lower against the yen in lackluster trading today amid hope an expected stimulus policy package will bolster Japan’s sluggish economy, increasing demand for yen. Japanese stocks retreated after a two day rally.

The dollar bought 125.34 yen in late afternoon trading, down 0.70 yen from late Tuesday in Tokyo and also below its late New York rate of 125.94 yen overnight.

The U.S. currency drifted lower on optimism about the impact of a set of economic stimulus measures expected to be unveiled before a meeting of the Group of Seven industrialized nations in London later this month, traders said.

``Speculation that the economic stimulus will be even larger than expected is inviting yen buying,″ said Takuma Kurosawa, chief foreign exchange manager at Mitsubishi Trust and Banking Ltd.

The dollar traded as low as 125.21 yen and as high as 125.90 yen.

On the Tokyo Stock Exchange, the benchmark 225-issue Nikkei Stock Average shed 140.36 points, or 0.82 percent, to close at 16,882.62. On Tuesday, the average gained 246.16 points, or 1.5 percent, after picking up 148.35 points on Monday.

``It’s natural to have a correction after gaining so much on a high volume of trade in such a short period,″ said Hirobumi Inomata, general manager of the stock division at Izumi Securities Co. ``But the MOF scandal also damped sentiment.″

Japan’s Ministry of Finance has been shaken by a recent barrage of accusations involving abuse of its far reaching oversight powers. Two ministry bureaucrats were arrested last week on bribery charges which forced the resignation of the two top ranked finance officials.

In a separate scandal, the former head of the ministry’s brokerage division denied reports that he had ordered a major brokerage to hide illicit trading losses.

The scandals have helped spark misgiving about the government’s ability to secure swift parliamentary approval of proposals aimed at shoring up the economy and an ailing financial system, traders said.

The broader Tokyo Stock Price Index of all issues listed on the first section of the Tokyo Stock Exchange lost 9.22 points, or 0.72 percent to close at 1,270.18. The TOPIX closed up 17.31 points, or 1.4 percent, the day before.

An estimated 400 million shares changed hands on the first section, down from 464 million issues Tuesday. Declining issues exceeded gainers 744 to 399 and 146 shares closed unchanged.

Stocks opened slightly higher following an overnight rise on Wall Street, where the Dow Jones industrial average closed at 8,160.35 points on Tuesday, up 52.57.

But after an early round of buying share prices moved into negative territory, pulled down by a drop in stock index futures, dealers said.

Meanwhile, the yield on the benchmark No. 182 10-year Japanese government bond fell to 1.760 percent from Tuesday’s finish of 1.790 percent, driving its price up to 108.32 yen from 108.11 yen.

Update hourly