Financial crisis drives Nikkei to 5-year closing low

Financial crisis drives Nikkei to 5-year closing low

Tokyo: Japan’s Nikkei average fell 3% to post a five-year closing low on Tuesday as panic over the global financial crisis prompted investors to dump stocks.

The benchmark had fallen more than 5% in the morning but trimmed those losses on bargain hunting and after a rate cut by Australia’s central bank raised hopes that more countries would take measures to contain the crisis.

A firm yen and the gloomy outlook for the global economy hurt exporters such as Canon Inc and automakers, whose earnings have been badly undercut by worsening economies overseas.

“The market has been in panic since last week, and a lot of people are moving into cash," said Koichi Ogawa, chief portfolio manager at Daiwa Asset Management. “It’s not really moving on sense, there are a lot of people who may have no choice but to sell."

The Nikkei shed 317.19 points to 10,155.90, the lowest close since December 2003. It earlier fell more than 5% to 9,916.21.

The broader Topix fell 2.2% to 977.61 after earlier also falling more than 5%.

US stocks slid for a fourth straight day on Monday, pushing the Dow below 10,000 for the first time in four years, on fears the world was hurtling towards recession despite efforts to fight the fast-spreading financial crisis.

“Once the market drops to this level, investors begin to expect governments will come up with some counter-measures," said Yoshinori Nagano, chief strategist at Daiwa Asset Management.

“As if to prove their expectations, Australia just cut interest rates by 1% and that gave the market hope that others might follow suit."

Australia’s central bank chopped its benchmark interest rate by one full percentage point to 6.0% on Tuesday, taking a bold move to protect the domestic economy and banking system from an increasingly hostile global environment.

While Japan has remained comparatively unscathed until now, policymakers admitted on Tuesday that the crisis is taking a toll, with Finance Minister Shoichi Nakagawa saying Japan’s economy was worsening.

Separately, Prime Minister Taro Aso said US financial conditions were very severe, and Tokyo should be prepared for its impact on Japanese exports, which drive its economy.

Amid the market turmoil, the projected price-earnings ratio of the Nikkei stock average tumbled to a 37-year low at 12.78 times on Monday, according to the Nikkei business daily.