TOKYO -- Gloomy economic news and the continuing plunge in the value of shares in a huge railroad the Japanese government recently sold to the public put the stock market into a tailspin yesterday, turning the steady slide of the past two weeks into a rout.
The Nikkei index of 225 shares tumbled a dangerously wide 499.45 points yesterday, or 2.7 percent, to 18,125.71, much of that toward the end of the day.
It was the second-worst fall for the market this year, and the wave of selling erased months of plodding gains. The decline, as well as prospects that the market might fall through the 18,000 level, left analysts concerned that share prices had not stabilized after nearly four solid years of losses.
[The Nikkei 225 index, after declining to 17,818.30 early Wednesday morning, recovered to close the morning session at 18,197.30, up from yesterday's close, Bloomberg Business News reported.]
Even a range of extraordinary efforts by the Finance Ministry, including throttling trading in the stock index futures market, ordering government-controlled pension funds to buy shares and forcing big banks and other institutions not to sell shares they own, have failed to restore confidence in the market.
Worse, the recent government sale of a little more than half of the shares in the East Japan Railway, or JR East, seems to have worsened the gloom. The sale, two weeks ago, was Japan's largest share offering in years. It had been planned carefully for years in hopes of bringing back individual investors.
But after rocketing in value in a confused first day of trading, JR East has since gone into a prolonged slump. Yesterday, the railway's shares fell 28,000 yen, to 451,000 yen ($4,176) a share.
The shares in another government-controlled company, Nippon Telegraph and Telephone, also plummeted, losing 36,000 yen, to 763,000 yen ($7,064.81).
Analysts have said that individuals piled into both shares in the expectation that the government would effectively protect them from big losses. Thus, the declines have taken a big toll on the confidence of small investors, analysts said.
There was also some bad news yesterday regarding the economy. The Economic Planning Agency has for months maintained that a recovery from the recession was imminent. It abandoned that optimistic language, however, bringing its forecast more into line with those of private economists, who have maintained that a strong recovery might not occur until mid-1994.
"There's nothing really new in the economic fundamentals," said Kathy Matsui, an analyst at Barclays de Zoette Wedd Securities in Tokyo. "The real problem is individual investors and their attitude."
Nonetheless, many in Japan instinctively continue to turn to the government for the support they believe is needed to end the 4-year-old nightmare on the stock market.
Yasuo Ueki, general manager of equities at Nikko Securities Co., was quoted as saying, "If we go to the 17,000 level, it's going to be a state of emergency that will prompt the government to take measures it has so far been cautious of taking."