Japan's benchmark Nikkei average shed 1.5 percent on Wednesday to hit its lowest close in nearly 4 months as financial shares sank amid worries about European banks and credit concerns hurt property firms. In a sign of wide-ranging worries that include a rapidly weakening Japanese economy and increased political uncertainty after the finance minister resigned, the broad-based Topix index ended only a few whiskers away from marking its lowest close in 25 years.
"Foreign investors have lost their appetite for buying Japanese stocks because it's probably the only country in the world, except for some emerging economies, to see its economy shrink by double digits," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
"The market also can't expect effective economic measures from the government as it's not in a position to do so right now," he said. Data this week showed Japan's economy shrank at an annualised rate of 12.7 percent in the final quarter of 2008, and Japan's finance minister resigned on Tuesday after being forced to deny he was drunk at a G7 news conference, dealing a huge blow to the country's already unpopular administration.
The Nikkei fell 111.07 points in moderate trade to 7,534.44, its lowest finish since October 27. The broader Topix ended 1 percent lower at 749.26, after touching a low of 744.37 at one point. Had it finished at that level, that would have been its lowest close since 1984.
Sentiment was fragile after the Dow Jones index and S&P 500 on Tuesday fell to their lowest levels since November 20, despite US President Barack Obama signing into law a $787 billion stimulus package, as weak manufacturing data showed the US recession was deepening. US financial stocks sank to 14-year lows after Moody's Investors Service said euro zone banks could be hit by the recession in Eastern Europe.
That pushed Japanese banks lower and Mitsubishi UFJ Financial Group, Japan's top lender, shed 3.1 percent to 437 yen. Sumitomo Mitsui Financial Group, Japan's No 3 bank, lost 4.6 percent to 3,120 yen and second-ranked Mizuho Financial Group fell 1.5 percent to 197 yen.
"Recent weak spots in the market are financials and property stocks because money flow is not smooth," said Yoku Ihara, manager at Retela Crea Securities. "After a series of bankruptcies in the sector, credit worries are weighing on investor confidence in property stocks."
Mitsui Fudosan, Japan's largest real estate developer, declined 2.6 percent to 1,068 yen while Sumitomo Realty & Development retreated 2.7 percent to 977 yen and Mitsubishi Estate gave up 2.7 percent to 1,060 yen. Sapporo Holdings extended losses and tumbled 8.1 percent to 350 yen after US fund Steel Partners withdrew a $548 million bid to raise its stake in the Japanese brewer to a third, citing the beer maker's deteriorating earnings.
The stock closed down 9.7 percent at 381 yen ahead of the announcement on Tuesday. But Toyota Motor Corp added 1.7 percent to 3,060 yen after a newspaper said the automaker plans to boost production in Japan by about 30 percent in May compared with average output of the three preceding months as it makes progress in cutting inventory levels.
Trade was moderate on the Tokyo exchange's first section, with 1.96 billion shares changing hands, compared with last week's daily average of 1.92 billion. Declining shares outnumbered advancing ones, 988 to 606.
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