Tokyo Stocks Close 3.8% Higher After G-7 Talks

Financial markets in Tokyo rebounded today, taking initial cheer from a vague indication of support for the yen from Japan’s economic allies over the weekend.

The Japanese currency opened at 155.80 yen to the dollar in Tokyo--1.67 yen stronger against the greenback than at Friday’s close--before settling down to 156.45 at the close. The weaker dollar reflected expectations that the central banks of the industrialized nations, whose finance ministers met in Paris on Saturday, would help the Bank of Japan intervene in global markets to prop up the sagging yen.

Stocks prices, in turn, joined in the optimistic mood after falling dramatically in recent weeks partly out of concern for the weakening yen.

The Nikkei index gained 1,119.15 points, or 3.82%, closing at 30,397.93, the first time it rose above the symbolic 30,000-point level since it lost 6.6% of its value in the market’s second-worst single plunge a week earlier. The market’s main barometer posted a 1,029.72-point gain Friday, the index’s fourth-largest single-day advance.

Although the finance ministers of the so-called Group of Seven--Japan, the United States, West Germany, Britain, France, Canada and Italy--failed to announce a clear-cut action plan aimed at supporting Japan’s financial markets, Japanese officials put a positive face on the meeting’s results. They said it was significant that the yen was specifically mentioned in the G-7 joint communique.

Finance Minister Ryutaro Hashimoto told reporters in Paris on Saturday that it was the first time that the G-7 ministers had singled out a particular nation’s currency other than the U.S. dollar.

The communique called for greater stability in foreign exchange markets, saying the yen’s recent decline could have “undesirable consequences” in efforts to reduce the U.S. trade deficit and did not rule out modest intervention to support the currency.

But the allies gave no indication that they would undertake the massive intervention needed to authoritatively influence currency markets and dashed Japanese hopes that they would cut their official interest rates.

Japanese officials were left with the prospect of further speculation that the Bank of Japan would be forced to raise its discount rate for a second time this year.

A bitter dispute between the Finance Ministry and the central bank over the latest rate hike, by 1 percentage point to 5.25% on March 20, undermined confidence in the policy-making ability of financial authorities and contributed to the recent market turmoil.

Hashimoto told reporters Sunday evening after his return from Paris that Japan had no intention of adopting a high-interest rate policy “because it would have grave implications for the world economy,” the Nihon Keizai newspaper reported today.