Japan stocks hit 15-year low

Another fall on the Nasdaq weakened investor confidence in Japan

The share value of Japan's major companies has fallen to levels not seen for fifteen years, following another slump in US technology stocks

Investors urged the government to review Japan's interest rates after stock prices fell in afternoon trading to their lowest levels since 10 December 1985.

The benchmark Nikkei 225 share index later recovered to close 1.35% down, itself a new 28-month low.

The slide followed a 4.36% fall on Wednesday in America's tech-heavy Nasdaq exchange, viewed with particular interest in Japan, which grew into an industrial power largely on the strength of its electronics firms.

"High tech [stocks] took a beating after the Nasdaq fall," said Akihiko Sakakibara, senior fund manager at Sumitomo Marine Asset Management.

Recession fears

The US fall also hit Europe's main markets in the first 20 minutes of Wednesday trade, with London's FTSE 100 index down 36.2 to 5,905 and the Paris Cac 40 index down 55 points to 5,382.5.

The sentiment of Tokyo investors was further undermined by figures showing that Japan's industrial production shrank 3.9% last month.

"It's a very bleak number. It's the first real sign we've got that the Japanese economy is slowing down very substantially," said Garry Evans, a strategist with HSBC Securities.

"The risk of Japan going back into outright recession is a very real risk."

Investors called on the Bank of Japan, which three weeks ago reduced a peripheral interest rate, to cut the main rate, raised from 0% to 0.5% in August on hopes of a recovery in the country's economy.

"Both the US and Japanese stock markets are seen requesting a cut in interest rates to their monetary authorities," said Hiroyuki Nakai, investment research manager at Tokai Tokyo Securities.

He warned that Tokyo shares may yet fall further, with the Nikkei, which closed at 12,883 on Wednesday, hitting 12,500 "sooner or later".

Nasdaq slides

The fall on the Nasdaq, to its lowest level since January 1999, followed figures showing that US consumer confidence had fallen for the fifth consecutive month to its lowest level for almost five years.

The Conference Board, which measures the US public's optimism about the economy, reported that its consumer confidence index fell by nine points to 106.8 from a revised 115.7 in January.

Economists polled by news agency Reuters had forecast the index would fall to 109.6.

The report sparked fears that consumer spending, one of the main engines of economic growth, was flagging.

Consumer spending makes up about two-thirds of economic output.

Hopes dashed

A separate report on US housing on Tuesday also suggested that the economy could be in trouble.

The number of buyers of new homes plunged 10.9% to 921,000 in January, the lowest level in 11 years, despite falling mortgage rates.

And investor optimism was further undermined by comments from an official at the US central bank, the Federal Reserve, dashing hopes of a cut in interest rates.

Fed vice chairman Roger Ferguson said there were mixed signals on the economy, but commented that consumer spending was holding up well, despite the drop in consumer confidence.

"How these apparently conflicting signals will be resolved going forward is not at all apparent from today's vantage point, and will bear close scrutiny," he said.

Dow resilient

The comments helped send Nasdaq-listed shares such as software giant Oracle and computer seller Gateway sharply lower.

Cisco shares ended at a two-year low.

But shares in more traditional industries proved resilient to the slide.

The broadly-based Dow Jones Industrial Average ended down just 5.65 points, or 0.05%, at 10,636.88.