Tokyo shares rebounded today to end higher as the market moved in concert with speculation over denials about the state of Japan’s banks.
The benchmark Nikkei 225 closed 309.24 or 2.6 per cent higher at 12,152.83. The broader Topix index rose 21.82 or 1.9 per cent to 1,183.79.
The bank sector fell 6.4 per cent, extending yesterday's declines on market speculation that Daiwa Bank was close to insolvency, and dragging the indices lower. But a strong denial of the rumours by Daiwa and news that three banks planning to merge next month will double their loan-loss charges alleviated the market’s gloom about the sector.
Daiwa shares ended 7.8 per cent lower at 141 yen, after falling 12 per cent in earlier trade.
Japanese banks have been slow to dispose of their non-performing loans and the government appears reluctant to push them into action. The bad-debt problem and falling share prices, which hurt banks' earnings, led Fitch international credit rating agency to place 19 Japanese banks on negative watch yesterday.
"The pasting the banks are taking (in the stock market) is a reflection of concerns about the lack of government action," said Mr Brian Waterhouse, bank analyst at HSBC Securities in Japan.
Technology shares rose in the afternoon after directionless trade earlier. Sony rose 40 yen to 8,160 yen , NEC gained 3.4 per cent to 1,618 yen and Fujitsu was up 38 yen at 1,460 yen.
Furukawa Electric rallied to close 5.1 per cent higher at 1,295 yen after the fibre-optic cables maker announced an alliance with Mitsui Chemicals. The two companies plan to jointly develop parts for WDM systems, through which data can be transmitted in high volumes and high speeds. Mitsui Chemicals was up 16 yen at 506 yen.
- Financial Times Service