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Nikkei plunges 1.69% on political chaos

06-03-2011 10:03 BJT

TOKYO, June 2 (Xinhua) -- Tokyo stocks fell sharply Thursday, dragged down by Wall Street's overnight plunge and uncertainty over Japan's political future as Prime Minister Naoto Kan, prior to surviving a no-confidence vote against him, said he would step down after resolving the nuclear crisis.

Brokers said that stocks lost ground from the get-go and the market mood remained insipid throughout the day ahead of Kan's Cabinet surviving a vote of no-confidence just after the close of trade.

Kan saying earlier in the day that he would step down once the nuclear crisis in Fukushima Prefecture had been brought under control and post-quake and tsunami rebuilding programs funded and launched, was met by mixed reactions as some investors were heartened that he had resolved to put an end to the nuclear crisis, yet others concerned that a political void will loom in Japan, market players said.

Kan neglected to say exactly when he would quit and analysts said that shares would be pressured by such political uncertainty and push investors to the sidelines, while concerns about the health of the U.S. economy continues to be a major external influence on Japanese issues.

"A political vacuum is unavoidable and as the global equity rally based on economic optimism since last November is running out of steam, Japanese shares are suffering from problems both at home and abroad, and their prices will be coming under pressure." said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.

Brokers said that the yen's rise against its major counterparts, as poor economic data from the U.S. increased concern the global economic recovery is slowing, led to Japanese exporters taking a pummeling, including automakers.

Data from the U.S. showed that manufacturing in the world's largest economy had slumped to more than a one-year low and companies' hiring of new staff had slowed.

The 225-issue Nikkei Stock Average lost 164.57 points, or 1.69 percent, from Wednesday to close at 9,555.04, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange fell 13.65 points, or 1.63 percent, to finish at 825.76.

Japanese automakers weighed heavily on the market with the yen appreciating to a high of 80.68 versus the U.S. dollar and 115.77 against its European counterpart. In addition sales of Toyota and Honda brand vehicles dropping in the U.S and Toyota losing ground in China also added to downward pressure on Japan's auto sector, brokers said.

Toyota lost 3.6 percent to 3,270 yen, while Honda dropped 2.4 percent to 3,045 yen. Nissan, meanwhile, skidded down 3.2 percent to close at 781 yen.

Among technology issues that were among today's notable decliners, industrial robotics maker Fanuc relinquished 2.6 percent to 12,340 yen and Kyocera Corp. dropped 1.8 percent to 8, 350 yen.

Consumer electronics makers also declined on the yen's strength, with Sony retreating 1.7 percent to 2,142 yen and Nintendo diving 3.7 percent to 18,400 yen.

Tokyo Electric Power Co. reversed losses following Kan's resignation announcement as the prime minister said he would resolve the Fukushima nuclear crisis before he stepped down.

Shares of Tokyo Electric slumped earlier in the day to a record- low of 282 yen on fears that political instability could affect the utility firm's ability to meet massive compensation claims from the victims of the nuclear crisis involving the firm's quake and tsunami-crippled No. 1 power plant in Fukushima Prefecture.

Tokyo Electric finished the day up 2.0 percent at 305 yen and Tohoku Electric Power added 1.4 percent to 940 yen. Kyushu Electric Power also closed in positive territory, rising 0.8 percent to finish at 1,215 yen.

Japanese oil-linked shares dropped as prices for crude fell 2.4 percent in New York on Wednesday, marking the steepest decline since May 11.

Inpex Corp. dropped 2.9 percent to 575,000 yen and counterpart Japan Petroleum Exploration Co. fell 3.1 percent to finish the day at 3,815 yen.

Trading volume on Thursday increased to 2.07 billion shares on the Tokyo Exchange's First Section, rising from Wednesday's volume of 1.97 billion shares, with declining issues outnumbering advancing ones by 1,390 to 191.

Editor:Yang Jie |Source: Xinhua

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