Key Tokyo Stock Index Takes 2nd-Sharpest Decline

Tokyo stock prices fell sharply Thursday, continuing a downward slide that has sheared 8.3% from a key market index in the past three weeks.

Despite a minor rally Thursday morning, the Nikkei-Dow Jones index of 225 key stocks fell 545.26 points to close at 17,019.13. The decline was second only to a plunge of 637.33 points Sept. 16.

Prices on the Tokyo exchange have been declining steadily since Sept. 12, when the market suddenly turned bearish after an 84-point drop in the Dow Jones industrial average in New York the day before.

Analysts interpreted Thursday’s decline in Tokyo as an indication that the market was still overheated and that investors were afraid that stock prices were artificially high due to a wave of large-volume speculative buying. Many of Japan’s major manufacturing firms have turned to speculating on the stock market in order to offset declining profits from exports.

Unlike the Sept. 12 decline, which was the Tokyo market’s reaction to events in the New York market, Thursday’s decline came on the heels of a 15-point gain by the Dow average Wednesday in New York.

An analyst at the Tokyo branch of a British investment bank said: “People sold because they felt the market was overextended.” But he added that prospects for the market’s bottoming out were not good because “there is still too much money chasing too few stocks.”

On some recent days, as much as 70% of trading has been confined to 10 leading stocks, the analyst said. The most popular stocks in Tokyo have been heavy industrials such as Mitsubishi, Nippon Kokan and Ishikawajima-Harima. The major attraction of these issues for the big corporate speculators is that there are enough shares in circulation to absorb the huge sums being plowed into the market.