Japanese stocks dive on reopening

Japanese stocks plunged Friday on the first day of trading of 2008, closing more than 4 per cent lower at their weakest levels in a year and a half as a slumping dollar and fears of a US recession battered investor confidence.

The benchmark Nikkei fell by as much as 5 per cent before finishing the half-day opening session down 4.03 per cent at 14,691.41. This was its lowest close since July 2006 and more than 100 points below its low point last year of 14,837.66, set on November 21.

The broader Topix index fell 4.32 per cent to 1,411.91.

The dollar was trading below Y109, close to its weakest level against the Japanese currency in a month, hurting shares of export-reliant manufacturers. Sony (NYSE:SNE) fell 6.6 per cent to Y5,790 and Nintendo declined 4.9 per cent to Y63,600.

Nissan (NASDAQ:NSANY) suffered its worst fall in six years after it reported a drop in US sales, plunging 9.2 per cent to Y1,230. Mazda lost 7.7 percent to close at Y515 and Toyota (NYSE:TM) fell 4.3 per cent to Y6,040.

The fall in shares helped push Japanese government bond futures to a one-month high, with March futures later retreating slightly to close up 0.51 points at 137.32. Gold rose about $2 an ounce to trade at around $865 though it remained below the record $869 set on Thursday in New York.

A fresh surge in the price of oil, which topped $100 a barrel for the first time this week, has added to concerns that the US economy could be headed for a sharper than expected downturn that could pinch growth around the world.

The fall in Japanese share prices outpaced the Dow Jones average's 2.3 per cent decline from Dec. 28 through Thursday, during which Tokyo markets were closed for the New Year holiday.

Yoshimi Watanabe, minister for financial services, sought to stem the decline, saying Japanese stocks are now a relative bargain at a price-to-earnings ratio of about 15.

Trade was frenetic, with about twice as many shares changing hands compared with the last week of 2007.