Asian Markets Update: Japanese Shares Slip Amid Talk of Declining GDP

Tokyo's government also decides to tax gross operating profit at major commercial banks.

Author:: Kaya Laterman
Publish date:: Feb 8, 2000 7:16 AM EST

Tokyo's government also decides to tax gross operating profit at major commercial banks.

TOKYO -- Japanese investors dumped shares amid a new corporate tax plan in Tokyo and the possibility of declining gross domestic product figures.

The

Nikkei 225

index fell 76.55 to 19,868.88, while the

Topix

index, made up of shares listed on the

Tokyo Stock Exchange's

first section, slipped 17.23, or 1.0%, to 1737.55. The

Jasdaq

small-cap index fell 0.75 to 108.82, while the Nikkei

over-the-counter

shares shed 12.57 to 2379.41.

Despite the selling Tuesday, long-term sentiment remained solid due to the launch of several new mutual funds. Enthusiasm was somewhat contained, however, and players expect the Nikkei 225 to hover around a key resistance level of 20,000 for the rest of the week.

The market was hit with news this morning that the Tokyo metropolitan government agreed to slap all major commercial banks with a 3% tax on gross operating profit for the next five years. Corporate taxes from Tokyo's financial institutions tanked to 3.4 billion yen in fiscal 1999 from a peak of more than 200 billion yen in fiscal 1989. That's because the current tax system does not require banks operating with losses -- which includes many major banks -- to pay taxes.

The

Ministry of Finance

also is reportedly thinking about taxing profits on securities bought for short-term speculative trades, the

Nihon Keizai Shimbun

reported.

Bank shares took a beating.

Fuji Bank

(FUJPY)

tumbled 55, or 5.2%, to 1000.

Sakura Bank

(SAKUY)

fell 32, or 4.7%, to 655, and

Bank of Tokyo Mitsubishi

(MBK)

slipped 48, or 3.4%, to 1375.

Shares of

Nissan Motor

(NSANY)

fell 19, or 4.3%, to 423 when

Standard & Poor's

downgraded the firm's long-term debt rating to BB+ from BBB-. S&P, which also changed its outlook on Nissan to stable from negative, said the rating reflected the challenges the automaker faced in carrying out its restructuring plans and continuation of weak operating performance.

The strength of the greenback to a fresh five-month high against the yen also hit certain tech shares. Normally, a weak yen helps Japanese computer exporters such as

Sony

(SNE) - Get Report

and

Fujitsu

. However, U.S. fund managers buying up the dollar -- either to buy more U.S. Treasuries or, as some dealers said Tuesday, to cover for losses in the U.S. bond market -- dumped certain tech shares to make up the difference. Sony, which saw its shares fall also because of a rumored delay in its March 4 launch of its PlayStation2 game consoles, slipped 830, or 2.8%, to 29,150, while Fujitsu fell 60, or 1.6%, to 3730.

In addition, comments from Taichi Sakaiya, head of the

Economic Planning Agency

, weighed on the yen. Sakaiya said Japan's gross domestic product for the October-December quarter would likely fall due to a slump in private consumption. The dollar stood around 109.40 yen.

After a brief halt in trading due to a power failure, Hong Kong's

Hang Seng

closed up 260.61, or 1.6%, to 16,228.13. The merger agreement between

Vodafone AirTouch

(VOD) - Get Report

and

Mannesmann

(MNNSY)

helped

China Telecom

(CHL) - Get Report

to climb 7.000, or 13.2%, to 60.000.