TOKYO -- A torrent of money from managers of mutual funds both new and old pushed Japan's key

Nikkei 225

stock index to its highest close since December 1996, in what could be the first wave in a new series of liquidity-driven rises for the country's stocks.

With the selling over the last month in the run-up to the close of fiscal 1999 finally over, fund managers were after both blue-chips and technology stocks on Wednesday, so much so that the downturn in U.S. shares overnight was given a scarcely a glance.

The Nikkei 225 climbed 323.31 points, or 1.6%, to 20,706.65, while the

Topix

index, which includes all shares listed on the

Tokyo Stock Exchange's

first section, jumped 52.08, or 3.1%, to 1732.84. The

Jasdaq

small-cap index was up 8.43, or 8.0%, to 114.28, while the Nikkei

over-the-counter

index rose 120.08, or 5.4%, to 2326.85.

As they have waited for institutional investors to finish booking profits for fiscal 1999, which ends Friday, fund managers have been eager to start investing cash amassed late last year at the start of the mutual fund boom here. More cash is actually coming their way, this time via maturing postal savings accounts, where some 58 trillion yen ($544 billion) worth of cash could be freed between April 1 and March 2001. Approximately 10 trillion yen will mature in April alone, so analysts are predicting that about 5 trillion yen will flow into equities via mutual funds over the next couple of months.

Most stocks appear to be benefiting, with blue-chips such as

Nippon Telegraph and Telephone

(NTT)

rising 40,000 yen, or 2.5%, to 1.66 million and

Toyota Motor

(TM) - Get Report

climbing 90, or 1.7%, to 5370. Tech shares are on a rebound, with

Softbank

rising 5000, or 5.8%, to 91,500,

Hikari Tsushin

jumping 5000, or 7.3%, to 73,800 and

Trans Cosmos

rising 2040, or 6.9%, to 31,700.

Still, as with tech stocks in other parts of the world, the sustainability of some lofty prices in the sector was coming into question even as stocks rose.

"Everyone wants tech plays to perform, so there will be enough buying by fund mangers over the next month or so. But we're also going to have to see some revenues from these Net firms sooner, rather than later," said one trader from a European house.

Sony

(SNE) - Get Report

rose 610, or 4.7%, to 13,730 after the

Nihon Keizai Shimbun

reported that is was close to gathering partners for its planned Internet banking scheme.

Sakura Bank

(SAKUY)

, which the paper said is in the last stages of talks with Sony, climbed 19, or 2.6%, to 744.

Faced with a strong stock market and favorable industrial production figures in Japan, the dollar weakened against the yen, to 106.02. The government reported Wednesday that industrial production in February rose 3% from the previous month, signaling to some that Japan's economy may stage a comeback in fiscal 2000. The rise was at the high end of market expectations.

Hong Kong's

Hang Seng

index fell 205.32, or 1.1%, to 18,096.37, after reaching a record close Tuesday. The pinch in U.S. equities hurt Hong Kong shares, with

HSBC

(HBC)

falling HK$1.00, or 1.1%, to 92.00,

China Telecom

(CHL) - Get Report

shedding 2.00, or 2.6%, to 74.50 and

Pacific Century CyberWorks

losing 0.85, or 4.3%, to 19.10.

Traders also said many foreign investors may push the index down to around 17,500 ahead of tomorrow's March futures expiry.