Nikkei slips 9.6 percent

Japan's Nikkei share average plunged 9.6 percent on Friday for its biggest drop since the 1987 stock crash, wiping out $202 billion in market value on growing fears that the financial crisis will spark a global recession. The Nikkei, which has fallen for seven straight days, lost 24 percent on the week, more than twice what it lost the week of the 1987 crash.
It has lost 46 percent this year. "This is panic. New York, the currencies - there's nothing left for us to trust," said Takashi Ushio, head of investment strategy at Marusan Securities. "Investors are scurrying to convert to cash. A lack of confidence is coupling with panic." Trouble hit home with the bankruptcy filing of Yamato Life Insurance, the first failure of a Japanese financial institution due to the global credit turmoil.
That shocked investors who had viewed Japan has relatively safe from much of the pain seen in the United States and Europe, and who were already rattled by the collapse of a domestic real estate investment trust and a fall in New York shares. The benchmark Nikkei sank 881.06 points to 8,276.43, its lowest close since May 2003. At one point it was down more than 1,000 points. The broader Topix shed 7.1 percent to 840.86.
"The Nikkei has lost close to 20 percent in three days alone, and it's certainly not as if economic fundamentals have worsened that much in that time period," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management. "It's basically all psychological. And it's not going to stop until fears about the financial system ha erased."
Prime Minister Taro Aso said the Nikkei tumble could hurt the wider economy, while ordinary Japanese were increasingly gloomy. "I see people getting fired from my company and since my salary has been reduced, I'm tightening my purse strings and have begun to think twice before I buy anything," said Maki Higuchi, a 30-year-old businesswoman.
The market plunge came as leaders from Group of Seven powers huddled in Washington to mull other joint measures to try and stop the panic in the markets. The US Treasury Department plans to start directly injecting capital in US banks as soon as the end of October in exchange for passive investment stakes, according to a financial policy source familiar with Treasury Secretary Henry Paulson's thinking.
"The US government is still debating whether it would inject money into financial institutions. It needs to act now even if that would be beyond the current law," said Yoshinori Nagano, chief strategist at Daiwa Asset Management. The slide gained impetus from investor wariness of holding large positions ahead of a three-day weekend in Japan, with Monday a national holiday.
Canon Inc lost 6.9 percent to 3,100 yen and Sony Corp shed 5.4 percent to 2,385 yen. Financials also slid, with top bank Mitsubishi UFJ Financial Group down 8.5 percent to 710 yen and Mizuho Financial Group tumbled 11.8 percent to 330,000 yen, its lowest close since early 2004. Trade picked up on the Tokyo exchange's first section, with 3.27 billion shares changing hands, compared with last week's daily average of 2.08 billion. Declining stocks outpaced advancing ones by more than 8 to 1.