Asian markets hurt by Wall Street woes

After Wall Street was pummelled by a sell-off, stock markets in Asia fell sharply today, with heavy losses in Japan, where concern is high over how a fragile government will deal with weaknesses in the world’s second-largest economy.

One day after Japan learned that its deeply troubled economy had narrowly avoided a recession late last year, Finance Minister Kiichi Miyazawa, said: ‘‘The economy itself is certainly in a state of deflation. There is no hiding that fact.’’

Deflation, the reverse of inflation, is a decline in the prices of goods and services.

That grim news was obvious on Japan’s benchmark 225-issue Nikkei Stock Average, which hit a new 16-year low today. It closed down 351.67 points, or 2.89%, at 11,819.70.

Some of the biggest losers at midday included Sony Corp, down 2.5%; NEC Corp, a huge electronics company, off 6.9%; and Nippon Telegraph and Telephone, Japan’s biggest telecommunications company, down 3.9%.

‘‘The US market is there, but I think the sell-off today is due to the problems in Japan,’’ said Susumu Kato, a bond strategist at Lehman Brothers Japan Inc.

‘The banking sector problem has gotten more serious, and the feeling is that the government won’t take effective action. The problems are structural, political and economic,’’ he said in an interview.

Japan is trying to pull out of its worst economic slow-down since World War II, and it is also struggling with political immobility.

On Monday, the government reported that the gross domestic product grew 0.8% in the fourth quarter of 2000. The figures mean the government will almost certainly achieve its goal of 1.2% economic growth in the fiscal year ending March 31.

But many officials were not comforted by the report, noting that consumption dwindled in the quarter, and that suggestions of a general downturn are visible in monthly indicators released since then.

Over the weekend, Prime Minister Yoshiro Mori, Japan’s most unpopular leader in decades, was widely reported to have agreed to step down soon. But he denied that two days later, setting off a storm of criticism and deepening concerns over a political vacuum in the country.

Japan is suffering a slow-down in its largest export market, the United States. For example, a decline in exports shaved 0.3 percentage points off Japan’s latest growth figures, highlighting its inability to rely on sales abroad to cure its economic woes and the ravages of deflation.

For years, Japan’s banks have been suffering from bad debts caused by a real estate market collapse, and by the decreasing value of their stock holdings.

Other financial markets in the Asia-Pacific region also fell sharply today, thanks to Wall Street, where the Nasdaq composite index fell 6.3% on Monday to close below 2,000 points for the first time in 27 months. The Dow Jones industrial average dropped more than 400 points, or 4.1%. One reason was a series of warnings from hi-tech companies in the United States, where the main bourses have been suffering from bearish sentiment for months.

The tech-heavy Nasdaq index is now down nearly 62% from the closing high it reached a year ago, and the selling spilled over to blue chips that had earlier escaped investors’ fury.

In Seoul, the Korea Composite Stock Price Index closed 17.08 points, or 3.13%, lower at 527.97. ‘‘It’s mainly a chain reaction linked to Wall Street,’’ said Lee In-ho, an analyst at SK Securities Co.

In Hong Kong, the blue-chip Hang Seng Index opened 3.3% lower, and by the afternoon it was trading down 392.96 points, or 2.85%, at 13,383.76.