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Tokyo Stocks Rise on Tax Cut Comments

<i> From Associated Press</i>

Tokyo stock prices rallied Friday after Japan’s prime minister advocated a permanent tax cut to boost the country’s sagging economy. European stocks followed Tokyo’s lead, but other Asian markets finished generally lower.

Financial markets in the United States were closed in observance of Independence Day.

The Tokyo Stock Exchange’s benchmark index climbed 39.66 points, or 0.24%, to close at 16,511.24. The gains came after Prime Minister Ryutaro Hashimoto indicated for the first time that he would support permanent tax relief instead of the current policy favoring one-time tax breaks.

Economists have called for such a move to boost consumer spending and lift Japan out of its worst recession since World War II.

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The pledge also helped the Japanese yen reverse earlier losses against the dollar, which dropped to 139.29 yen in late European trading from 140.50 late Thursday. The U.S. currency also fell to 1.8169 German marks, down from 1.8225.

Other Asian stock markets finished lower, however, due partly to lingering disappointment that a Japanese bank reform plan announced Thursday contained few surprises.

Hong Kong’s blue-chip Hang Seng fell 226.85 points, or 2.6%, to close at 8,639.31, reversing a 3.8% surge Thursday. Brokers said investors considered Japan’s widely anticipated plan to take control of debt-laden banks and gradually shut them down to be insufficient.

Stocks also fell in South Korea, Thailand, Taiwan, New Zealand, the Philippines, Malaysia and Singapore.

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But Tokyo’s rise helped inspire gains in Europe’s main stock indexes.

In London, the Financial Times Stock Exchange 100-share index rose 28.2 points, or 0.5%, at 5,988.4 points. Frankfurt’s DAX index climbed 45.38 points, or 0.8%, to 5,951.93. The Paris CAC 40 index rose 52.29 points, or 1.2%, to 4,304.38, led by auto stocks.

In other markets, the South African currency plunged to a record low against the dollar for a second straight day. The rand settled at 6.37 to the dollar, down from 6.26 late Thursday, after falling to an all-time low of 6.44 earlier in the day.

The rand has been under pressure because of the global emerging market crisis sparked by Asia’s financial woes. As the rand became vulnerable, it came under assault by currency speculators and has lost about 23% of its value against the dollar this year.

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Mexico’s stock index rose for a fifth day, gaining 1.17% to 4483.75 points. The U.S. holiday limited trading.


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