Asian Markets Resume Slide Despite Government Efforts

TOKYO, Oct. 27 -- Fear of a global recession again punished stock markets Monday, while governments tried to stem the damage from an eroding world economy.

Kuwait stepped in to avoid a major bank failure, South Korea slashed interest rates, and the world's top industrialized nations hinted at possible action to curb the rapid rise in the value of the Japanese yen. The International Monetary Fund over the weekend said it had reached preliminary agreement on emergency loans for Hungary and Ukraine.

By day's end in Asia, Japan's Nikkei had closed at a 26-year low, while the Paris CAC 40 closed down 4 percent. Losses weren't as bad in London's FTSE, down 0.8 percent, and Germany's Dax gained 0.9 percent. U.S. market futures through much of the morning indicated a sharply lower opening on Wall Street but moderated after the U.S. Treasury said it expected to release this week $125 billion it is investing in the preferred stock of nine banks. But a sell-off in the last 10 minutes of trading sent major U.S. exchanges down between 2.4 percent and 3.2 percent by closing.

A soaring yen is making Japanese exports more expensive, even as global demand for them dwindles. The currency's swing has been so sharp that the Group of Seven industrialized nations warned of "possible adverse implications for economic and financial stability."

The yen is up 13 percent against the dollar this month and 29 percent versus the euro, while the Nikkei stock average has become one of the worst performers in the world. Japanese stocks have lost 30 percent of their value this month and fell another 6.4 percent Monday. Japan's two biggest banks fell 15 percent.

Japanese Prime Minister Taro Aso ordered his government to prepare emergency measures to stabilize markets. They are expected to include government purchase of bank stocks, tighter rules on short selling and a five-fold increase in the amount of government money that can be injected into banks.

"Unless we take appropriate steps, there will be major impact on the real economy," Aso told reporters. "We must act as soon as possible, starting today."

In Japan, export dependence rose to a record high this year -- just in time to be clobbered by the surging yen and falling demand. Overseas markets accounted for 45 percent of all manufacturing sales for the year ending in March, according to the Nikkei financial newspaper.

Export-driven, brand-name corporations such as Sony and Canon have become the only engine of growth in the sluggish Japanese economy. But they are all in deep trouble now.

Canon, the largest maker of digital cameras in the world, said Monday its third-quarter profits fell by 21 percent from a year earlier. It cited declining demand and a stronger yen. For similar reasons, Sony said last week it expects annual profits to crater by about 60 percent.

Japanese Finance Minister Shoichi Nakagawa said Japan had asked for G-7 members to make the announcement about concern over the yen, but he did not specify any steps that Japan or other countries might take to halt the yen's rise.

Part of the yen's rapid appreciation is being caused by investors who are rushing to unwind their investments in what is known as the yen carry trade.