Japanese stocks plunge again

Japan’s main stock market nose-dived for a second day today on growing investor jitters from “Livedoor shock,” the widening criminal investigation at an internet start-up that has sparked a sell-off, especially in technology shares.

The benchmark for the Tokyo Stock Exchange plunged 2.9 per cent today in a session that had to be shortened by 20 minutes because of a surge in transactions. The Nikkei 225 index dropped 464.77 points to close at 15,341.18 points, its biggest drop since May 10, 2004.

Share prices extended losses from yesterday, when the Nikkei fell 2.8%, following Japanese newspaper reports that the investigation that had started on Monday was expanding. The index has fallen nearly 6% the past two days.

“Individual and foreign investors are selling in a panic,” said Satoru Otsuka, senior economist at Mizuho Research Institute in Tokyo. “The problem is that we have no idea how the Livedoor problem will unfold.”

Investors and the Japanese public alike were stunned when prosecutors marched into the Tokyo headquarters of Livedoor on Monday evening on suspicion of violation of securities laws by giving false information.

Livedoor is headed by 33-year-old Takafumi Horie, who has risen to celebrity status for his frequent TV appearances and unsuccessful attempts to buy a media conglomerate and a baseball team. Horie denies any wrongdoing and has pledged to co-operate with authorities.

The Japanese media have dubbed the two-day plunge in Tokyo stocks as “Livedoor shock,” which has received banner headlines and intense media coverage the past two days.

Technology and electronics firms took a hit today, including Advantest, Canon, Toshiba and Sony.

Those losses could also be partly attributed to investor reaction to earnings results yesterday from US chipmaker Intel and Yahoo, which were lower than analysts’ expectations.

The Tokyo Stock Exchange issued a warning in the early afternoon it handled 2.32 million transactions in the morning session and would stop trading if the system limit of 4 million transactions was reached.

Total trading volume, which is a higher measure because each transaction typically involves many shares, was 3.28 billion on the first section, up from 2.465 billion yesterday.

Livedoor’s shares were briefly suspended during morning trading. Livedoor’s stock fell 14.4% yesterday, the maximum amount allowed, to 596 yen (€4.26), and closed unchanged today.

Kyodo News agency reported the fresh probe today, but neither Livedoor nor the Tokyo Prosecutors Office could confirm that report.

The national daily newspaper Yomiuri Shimbun today reported that Livedoor was suspected of concealing a 1 billion yen (€7.1m) deficit for the full-year results ending September 2004.