Japan's Nikkei average slipped 1.5 per cent today to a four-month closing low, hurt by a fall in Nomura Holdings and after Wall Street slid to a 12-year low on fears about financial system stability.
Investors mostly shrugged off a comment from Japan's finance minister that the government is studying measures to support the stock market, as the Nikkei briefly touched 7,155.16 -- not far from a 26-year low just under 7,000.
Nomura, Japan's largest brokerage, fell 9 per cent on dilution worries after announcing plans to raise $3.3 billion in its first share sale in 20 years, as costs from its purchase of Lehman Brothers assets force it to replenish its capital.
But carmakers such as Toyota Motor turned positive in late trade as the dollar surged to a three-month high against the yen, helping the Nikkei pare losses that at one point took it down 3 per cent.
Despite the rise in auto shares, the overall mood was dark.
"The situation has become a complete 'sell Japan' scenario, roughly since the GDP figures last week showed such a steep fall," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Securities.
"With the consensus growing that first quarter GDP will fall by double digits as well, funds are fleeing Japan."
Japan's economy shrank at an annualised 12.7 per cent in the last three months of last year, its biggest contraction in about 35 years, as exports slumped on vanishing global demand.
The benchmark Nikkei shed 107.60 points to 7,268.56, its lowest close since October 27th, bringing its losses for this year to 18 per cent.
The broader Topix lost 0.7 per cent to 730.28, its lowest close since December 27th, 1983.
The Nikkei's correlation with the dollar/yen has turned negative on a 90-day rolling basis on concerns about the economy, political uncertainty and ebbing demand for the yen. It had been strongly positive at the end of last year when the dollar and the Nikkei were plunging in tandem.
Reuters