By Blaine Harden
Washington Post Foreign Service
Wednesday, October 15, 2008
TOKYO, Oct. 15 -- Feverish buying in Japan on Tuesday replaced last week's market panic as the benchmark Nikkei stock index posted its largest-ever percentage gain in a single day, up 14.2 percent.
Stocks surged for a second day across much of Asia, and a regional index of stocks rose more than 9 percent. South Korea's currency, which had been spiraling downward in tandem with the country's stock market, rose briskly, as did several other Asian currencies.
Following modest loses on Wall Street on Tuesday, stocks in Japan and across much of Asia were down by about 1 percent in early trading Wednesday.
Markets in Japan were closed Monday, the first day of trading after the United States and other major powers agreed to buy stakes in banks to avert a global market collapse. On Tuesday, Japanese investors raced to catch up with Wall Street and the rest the world, briefly triggering circuit breakers in Nikkei futures in Osaka and flooding trading floors with orders that often took more than an hour to process.
Banks, car companies and electronics manufacturers, many of which lost more than a quarter of their value last week, rebounded strongly. Toyota was up more than 15 percent, and Sony jumped 17 percent. Mitsubishi UFJ Financial Group, the huge Japanese bank that on Monday sealed its $9 billion purchase of a 21 percent stake in Morgan Stanley, rose 14 percent before trading was suspended because of too many buy orders.
Several analysts here said that investors believe, at least for the moment, that governments around the world have addressed the root problems of the financial crisis.
The government of Japan announced additional moves Tuesday to revive the stock market, which this year had lost more than half its value. The Bank of Japan also pledged to provide as much liquidity to banks as needed to stabilize markets.
The government will relax rules that prevent companies from buying their own stock, said Finance Minister Shoichi Nakagawa. He also said the government and the Bank of Japan would stop selling the $33 billion in bank stocks they acquired a result of bailing out financial institutions after Japan's 1990 economic crisis.
To enhance "smooth financing" of small and medium-size companies -- which have been starved for credit in recent weeks -- Nakagawa said the government would consider injecting money into local banks.
Tuesday's record-breaking rally in Japan stocks, however, will do little to alter a deepening recession here or reverse a steep slide in exports that began last spring. The problem was highlighted Wednesday, as the government released data showing that the current-account surplus has shrunk for six consecutive months.
Due to higher oil prices this year, the $10 billion surplus in August was about half as large as a year earlier, the Ministry of Finance said. Exports in August were flat, while imports jumped 20 percent.