TOKYO - Tokyo's Nikkei average plunged to an 18-year low by the close on Tuesday after banks and other major blue-chip issues took a beating on worries over the dimming economic outlook in Japan and the United States. The Nikkei finished 3.2 percent lower at 9,217.04, falling below the previous year-to-date closing low of 9,420.85 marked in February. It was the lowest close since November 7, 1983, when the Nikkei closed at 9,216.21. The banking sector subindex IBNKS.tumbled more than five percent, the second-biggest loser after the brokerage index ISECU. on the Tokyo Stock Exchange's first section, helping send the capital-weighted TOPIX index down 2.81 percent to 904.24. "The market fell prey to sellers after investors fled in the midst of the vacuum of trading incentives after a holiday on Wall Street," said Kazunori Jinnai, general manager at Daiwa Securities SMBC's equity department.
Among the hardest hit were Mizuho Holdings, Japan's biggest banking group, and its peers. Japanese banks have large holdings of stocks in their portfolios, and falls in the market eat into their capital base, increasing worries about the nation's fragile financial system in the run-up to the end of the first half on September 30. Mizuho sank 9.24 percent to 226,000 yen and second-ranked Sumitomo Mitsui Banking Corp slumped 7.95 percent to 556 yen.
"The market here seems to have started factoring in near-term risk of negative growth in Japan," said Toyomi Kusano, director and deputy branch manager at Credit Agricole Indosuez Securities. Data on Friday showed that the Japanese economy grew at a faster-than-expected 0.5 percent in the April-June quarter, but industrial production fell unexpectedly for the second straight month in July and other data showed deflation worsening. //