Tokyo shares tumble to close 3.55 pc lower

August 31, 2010

,  TOKYO, Aug 31 – Tokyo shares plunged 3.55 percent Tuesday, hitting a fresh 16-month low as worries over a persistently strong yen hit exporters.

The headline Nikkei index at the Tokyo Stock Exchange dropped 325.20 points to 8,824.06, its lowest close since April 2009.

The Topix index of all first-section shares fell 2.96 percent, or 24.54 points, to 804.67.

Despite new economic measures from financial authorities, a high yen and a slide on Wall Street conspired to keep worries over the health of the global economy at the forefront of investors\’ minds.

The central bank announced an extension to a multi-billion-dollar loan programme Monday in response to strong pressure from government officials to curb the yen\’s rise and support an economy mired in deflation.

The government for its part unveiled a 920 billion yen (11 billion dollar) stimulus, including steps to boost employment for graduates, investment in green industries and support for smaller businesses.

But news of the latest measures failed to halt the yen\’s advance, and Tuesday\’s heavy losses more than wiped out Monday\’s gains.

On Tuesday the yen surged to 84.15 to the dollar, up from 85.36 yen on Monday afternoon despite the BoJ announcement on its actions aimed at lowering the value of the Japanese currency.

"Japan is giving investors the impression that it\’s running out of options to counter market weakness," Kenichi Hirano, strategist at Tachibana Securities, told Dow Jones Newswires.

Japanese authorities have attempted, but failed, to contain the yen\’s steady appreciation, which hurts exporters by making their products relatively more expensive overseas while making imports cheaper, fuelling deflation.

A strong yen also reduces the value of overseas earnings of Japanese firms when repatriated into the Japanese unit.


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