Japan stocks battered by rising yen, Dubai worries

By TOMOKO A. HOSAKA

posted: 10 HOURS 5 MINUTES AGO

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TOKYO -Japanese stocks tumbled Friday, as a rapidly surging yen pummeled exporters and Dubai's massive debt problems triggered selling of financial issues.

The benchmark Nikkei 225 stock average shed 301.72 points, or 3.2 percent, to 9,081.52 — its lowest close since July 13. The broader Topix index fell 2.2 percent to 811.01.

The dollar sank to a fresh 14-year low against the yen in early Asian trading as worries about Dubai's debt mountain drove investors to buy safe haven assets like the yen.

Investors pared riskier plays on equities and commodities after Dubai World, a government investment fund with debts totaling around $60 billion, asked creditors if it can postpone payments until May. The news led to fears of a massive default and heavy losses at banks and companies exposed to the debt.

The U.S. currency briefly touched 84.41 yen — the lowest since mid-1995 — before recovering to the 86-yen level. That is substantially below the average 94.5 yen assumed by companies this fiscal year.

Finance Minister Hirohisa Fujii toughened his rhetoric Friday, calling the yen's sharp rise "one-sided" and vowing to take appropriate steps if needed. His words moved the government, which has not intervened in currency markets since 2004, closer toward possible action.

But Chiharu Hirose, an equity strategist at Tachibana Securities in Tokyo, said the yen is likely to keep appreciating, adding more downward pressure on Japanese stocks.

"If there is no change in fundamentals, then even if the speed of the decline eases, there will be no real change in dollar weakness," he said.

That's bad news for the world's second biggest economy, which is particularly vulnerable to foreign exchange fluctuations because it relies heavily on exports. A strong yen not only erodes overseas profits for exporters, but also raises prices of Japanese cars and gadgets abroad.

Shares of automakers and electronics companies fell sharply, with Nissan Motor Co. down 4.6 percent at 605 yen and Honda Motor Co. off 3.8 percent at 2,660 yen. Sony Corp. slumped 4.4 percent to 2,265 yen.

Financial issues also succumbed to the weak sentiment. Sumitomo Mitsui Financial Group Inc. lost 3.7 percent to 2,620 yen and Mizuho Financial Group Inc. closed 3.9 percent lower at 148 yen.

In currencies, the dollar was trading at 86.04 yen from 86.54 yen late Thursday. The euro fell to $1.4857 from $1.5021.

2009-11-27 03:02:52