Political fallout pummels Nikkei
JAPANESE stock prices dived nearly five per cent yesterday as Tokyo investors bailed out of the market following the rejection late on Friday of a political reform package.
The upper house of Japan's parliament rejected Prime Minister Morihiro Hosokawa's reform plan on a 130-118 vote on Friday after Tokyo markets closed.
The Nikkei benchmark average closed down 954.19 points, 4.94 per cent, at 18,353.24 yesterday. It was the largest one-day drop since 1990.
On September 26, 1990, the Nikkei average fell 1,121.18 points.
Jardine Fleming Securities (Japan) market analyst Chuck Lambert said the plunge had not been a total surprise.
''With the political reform bill failing to get through, it was expected that the market would go down by as much as 1,000 points,'' he said.
Although Mr Lambert expected the Nikkei to continue falling this week, he predicted it would recover later in the year because of an ''eventual economic recovery'' and the emergence of a more stable leadership.
However, he said that in the present uncertain political climate, ''anything was possible''.
Mr Lambert added that it was unlikely Mr Hosokawa would be forced to call an election because the opposition Liberal Democratic Party did not want to be blamed for destroying the country's economic stimulus programme.
The Kyodo News Service reported yesterday that the Government's economic package, scheduled for mid-January and widely reported to be valued at about seven trillion yen (about HK$485 billion) plus half as much again in income tax cuts, had been put back to February while the political situation remained unresolved.
Japanese conservative institutions saw yesterday's stock market decline as a signal to lock in profits before the financial year end on March 31.
Traders noted selling above 18,591, the level at which the Nikkei ended the last financial year.