Japan's Ministry of Finance accused international investors and credit rating agencies of overreacting yesterday after the shares of some Japanese banks and brokers plunged more than 30 per cent.
The falls were triggered in part by fears that other financial institutions would collapse following the failure this week of Yamaichi Securities, the country's fourth-largest stockbroker.
In addition, more leading banks posted dismal interim results as they struggled to overcome the lingering burden of bad debts accumulated during the property boom in the late 1980s.
Bank of Tokyo Mitsubishi, the world's largest bank; Yasuda Trust, the troubled trust bank; and Nippon Trust all reported net losses in the six months to September 30th.
The Nikkei 225 average dropped 5.1 per cent - the second-biggest fall this year - falling through the 16,000 mark to close at 15,867. The yen briefly dropped through the Y128 level against the dollar.
"This is a total over-reaction," said Mr Sei Nakai, a senior official at the finance ministry banking bureau, after the markets closed.
His complaint followed the decision of Standard & Poor's, the US credit rating agency, to downgrade the debt of Yasuda Trust to "junk bond" status.
Standard and Poor's yesterday also lowered South Korea's currency ratings as a reflection of the "rapid deterioration in (South) Korea's financial position." South Korea's foreign currency long-term credit rating was cut to single-'A'-minus from single-'A'plus and the local currency credit rating to single-'A'-plus from double-'A'.
Officials at the Bank of Japan said the Nikkei's drop had been less than feared. During the day, the bank had taken measures to calm the markets, they added. It had pumped liquidity into the money markets and provided Y800 billion of loans to Yamaichi to help it cope with short-term funding problems.
Tokyo stocks rebounded in early morning trade today as the Nikkei 225 benchmark recovered from its second largest fall of the year on Tuesday, fending off news a regional bank was going out of business.Brokers said signs of heightening debate over the use of public funds to stabilise Japan's financial system after the recent string of financial failures was providing the market with support.The Nikkei average was up 186.42 points or 1.17 per cent at 16,053.95.Irish stocks ended slightly higher as the leading bank and industrial shares shrugged off Tokyo's jitters to make modest gains. Dealers said the market was encouraged by an early rally on Wall Street while European stock markets, which lost two to three percent on Monday, also held up well. In Dublin, the ISEQ index of Irish shares ended 11.23 points or 0.30 per cent higher at 3,725.32. Most Irish companies have little or no exposure to the far east which traders said also helped to insulate the market from the financial crisis sweeping Asia.
