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Japanese Stocks Decline

July 6, 1998

TOKYO (AP) _ The dollar rose against the yen Monday on receding hope the Japanese government will announce major tax cuts to spur the economy. Japanese stock prices lost ground.

The dollar bought 140.46 yen in mid-afternoon trading, up 1.22 yen from late Friday in Tokyo. Financial markets in New York were closed Friday for the U.S. Independence Day holiday.

The yen weakened following comments from top government officials which seemed to backpedal on earlier suggestions that permanent tax cuts would be implemented.

On Friday, Prime Minister Ryutaro Hashimoto made remarks which appeared to back permanent income tax cuts. But speaking on national television Sunday, Hashimoto said although permanent tax reforms would be debated, there might not be any net reduction in the overall tax burden.

``It’s just too confusing,″ said Takashi Nakauchi, foreign exchange manager at Bank of Tokyo-Mitsubishi.

``Friday, Hashimoto hints at tax cuts and we send the dollar down to the 138 yen level. Then we come in this morning and the dollar’s near 141 yen because of Sunday’s comments,″ Nakauchi said.

Also, on Monday, Deputy Chief Cabinet Secretary Teijiro Furukawa told reporters that Foreign Minister Keizo Obuchi misspoke Saturday when he promised U.S. Secretary of State Madeleine Albright that Japan would adopt permanent tax cuts.

The tax-cut talk comes amid fierce campaigning ahead of July 12 elections to the upper house of Parliament.

On the Tokyo Stock Exchange, meanwhile, the 225-issue Nikkei Stock Average shed 160.79 points, or 0.97 percent, to close at 16,350.45. The Nikkei index had gained 39.66 points, or 0.24 percent, on Friday, for its eighth straight rise.

Many investors retreated to the sidelines on Monday to monitor developments regarding tax cuts.

``Investors want to see in what way a tax cut is implemented,″ said Setsuo Nagao, a manager in the stock trading division of Tokyo Securities.

The broader Tokyo Stock Price Index of all issues listed on the first section lost 9.91 points, or 0.78 percent, to 1,258.45. The TOPIX had closed down 2.10 points, or 0.17 percent on Friday.

The yield on the benchmark No. 182 10-year Japanese government bond fell to 1.295 percent from Friday’s finish of 1.340 percent, driving its price up to 111.22 yen from 110.90 yen.

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