Tokyo Stocks Fall Slightly in Light Trading : Markets: Drop is seen as a mild reaction to concerns about the yen, North Korea’s future and lackluster G-7 results.

Stocks declined in early trading here today on worries about the yen’s strength against the dollar, the death of North Korean President Kim Il Sung and lackluster results from the Naples, Italy, summit of industrialized nations.

Kim’s death, announced Saturday, and the Group of Seven summit, which ended Sunday, “both were negative” for Tokyo markets “but not tremendously,” said Keith Donaldson, equity strategist at Salomon Bros. Asia. “The real crux of the matter still is the yen” and whether it will continue to gain in value against the U.S. dollar, he said.

The 225-stock Nikkei index fell 67.12 points, or 0.3%, to close the morning today at 20,459.39 in light trading. “The market is likely to stay cautious as players try to gauge the effects of a leadership change in North Korea,” said Shigeyoshi Fujita, general manager at Cosmo Securities.

The dollar, meanwhile, was trading at midmorning today at 98.32 yen, down 0.21 yen from Friday’s Tokyo close but up 0.22 yen from Friday’s close in New York.

At one point earlier today, the dollar hit a new worldwide low of 97.60 yen in Sydney, Australia. It also dipped to 97.90 yen in the Tokyo market this morning before recovering some ground on the strength of intervention by the Bank of Japan in support of the yen. The dollar closed morning trading at 98.37 yen, down 0.16 yen from Friday’s Tokyo close but up 0.27 yen from Friday’s close in New York.

The death of Kim “raises the specter of some political instability for the region,” Donaldson said, “but I don’t think people are overly concerned.”

The impact on the Tokyo stock market is also limited, he said, by the tendency of investors to treat the dollar as a “safe haven” during times of international instability.

“As long as there’s no more negative news from Korea, the (value of the) yen is more likely to have an impact on the (stock) market than North Korea,” he said.

Kim’s death may be seen as a negative factor for the Tokyo stock market because it ends hopes for an early summit meeting between the presidents of North Korea and South Korea, and could delay other efforts to ease tensions over Pyongyang’s nuclear program, said Geoffrey Barker, an analyst at Baring Securities Ltd.

But there also is a “compensating factor” in that there may be “a period of introversion in North Korea,” he said. “I would think that having a fight with the United States or pushing the nuclear issue would go on the back burner for a while. So I think this is not a key point. We’re not going to need to worry about it.”

The G-7 summit in Naples was marked by “an immense amount of complacency” by the various leaders, but its limited results produced “very little disappointment in the markets because there was so little expectation,” Barker said. “The Japanese market is off a little, but we’re not talking about major disappointment.”