Japan Stocks Drop to Near 4-Year Low as Bank Rescue Plan Fails

By Masaki Kondo

Sept. 30 (Bloomberg) -- Japan's stocks plunged the lowest in almost four years after a U.S. bank-rescue package failed, unemployment rose and production slumped, raising concern the financial crisis is spreading through the broader economy.

Sumitomo Mitsui Financial Group Inc., Japan's third-biggest listed bank, and Nomura Holdings Inc., the largest brokerage, sank more than 7 percent. Mitsubishi Corp., a trading company that gets more than half its profit from commodities, tumbled 7.1 percent after crude fell the most in seven years.

``The global financial market is nearing the brink of collapse, and the only real choice investors have right now is to sell stocks and hold cash,'' said Mitsushige Akino, who oversees $468 million at Ichiyoshi Investment Management Co. in Tokyo.

The Nikkei 225 Stock Average declined 483.75, or 4.1 percent, to close at 11,259.86 in Tokyo. The broader Topix index fell 40.46, or 3.6 percent, to 1,087.41, the lowest since December 2004. All 33 industry groups on the Topix slumped.

The U.S. House of Representatives voted yesterday to reject a $700 billion rescue package for the financial system, sparking the biggest drop in the Standard & Poor's 500 Index since the October 1987 crash. Treasury Secretary Henry Paulson said he'll work to salvage the plan that would give him the authority to buy bad loans from financial companies.

Japan's unemployment rate rose to the highest in two years in August while industrial production fell at the fastest pace in five years, the government said today, signaling the reach of the economic slowdown to households and manufacturers.

The Topix slumped 13 percent in September, its worst monthly decline since November 1993. The gauge is down 40 percent from a 15-year high reached in February 2007. The Nikkei fell 14 percent this month, its steepest slide in a decade.

Nikkei futures expiring in December retreated 4.2 percent to 11,290 in Osaka and slumped 4.4 percent to 11,290 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.