Tokyo shock as bond sale fails

THE financial crisis facing Japan deepened when the government failed for the first time to sell a tranche of 10-year bonds. The uncertain outlook for the country's economy and banking system left the issue subscribed only 0.88 times, sending prices of existing issues sliding.

Japanese stocks were also in retreat again today as investors wrestled with the implications of the Bank of Japan's unprecedented plan to buy up stock holdings from the major banks. Other Asian markets fell as poor earnings and economic news continued to pour out of the US, and Wall Street's overnight slump of 2.8% added to the gloom.

The Nikkei Average closed down 188.54 points at 9481.08 as bank shares gave up some of the stellar gains that followed Wednesday's shock announcement that the BoJ would buy shares from banks to ward off a collapse of the system. The strategy received mixed reviews, with some economists saying this was just one more sticking plaster being applied to an economy that needed major surgery.

Credit rating agency Standard & Poor's called the move shocking. Moody's Investors Services said that while it would add some short-term stability, it raised further concerns about the banks' solvency.

The long-term risk to the financial system of the central bank becoming a major holder of equities also concerned some investors while others worried that the BoJ's independence was in danger.

No details were released on how the BoJ will carry out its rescue mission, and big lenders, which had risen by more than 15% in two days, drifted back. Mizuho Holdings, the world's largest bank, was down 4.5%. The pressure on the Nikkei was increased by large falls in electronics stocks after Nasdaq's overnight dive of 2.8%. This followed a profit warning from computer services giant Electronics Data Systems.

Asian nerves were also jangled by bad profit news from bankers JP Morgan Chase and Morgan Stanley, while a disturbing fall in US housing starts and slack employment figures were seen as a threat to Asia's export prospects.

Hong Kong's market fell to an 11-month low as the Hang Seng index suffered its third consecutive loss, down 190.45 points at 9237.34. Export traders led the falls but telecom stocks were also hit by reports that mainland fixed-line giant China Telecom is set to launch its shares locally. A cloudier outlook for the US operations of HSBC Holdings sent the bank's stock down HK$1 to HK$83.75.

Big falls in Taiwan's computer-related companies took the Weighted Average down 75.23 points to 4416.08, its lowest level of the year. Sydney stocks tested six-week lows as investors fretted about Middle East hostilities, Wall Street and the US economy, and the All Ordinaries index closed 16.9 points down at 3027.2. News Corporation shares were down 3% and Rio Tinto Zinc fell 2%.

Electronics counters were sharply off in Singapore and the Straits Times index slid 22.54 points to 1416.57, while Malaysia's Kuala Lumpur Composite index lost 4.19 points at 671.37.

Thailand's SET index fell 3.16 points to 349.18, while the Jakarta Composite index in Indonesia was down 3.59 points at 405.11. South Korean markets were closed for a holiday.

Prices and indices in this section are supplied from various sources and calculated at different times and may not always match those listed in the tables.