Japan stocks rise as Nikkei ends worst year ever

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(Agencies)
Updated: 2008-12-30 17:30

TOKYO -- A miserable year for Japanese stocks ended with a modest gain Tuesday that did little to mitigate the market's worst annual performance on record.

Officers and employees of securities companies cast shadows on a sign of the Tokyo Stock Exchange (TSE) during a ceremony marking the end of trading in 2008 at the TSE in Tokyo December 30, 2008. Tokyo shares looked set to book their worst year ever in 2008, with the Nikkei benchmark average losing 0.4 percent on Tuesday. [Agencies]

The benchmark Nikkei 225 stock average added 112.39 points, or 1.3 percent, to 8,859.56 in a shortened half-day session. The broader Topix index gained 0.5 percent to 859.24.

Hit by the global financial crisis, a deepening recession and a surging yen, the Nikkei shed a massive 42 percent in 2008. It was the index's steepest fall ever, outpacing a 39 percent decline in 1990 after Japan's so-called "bubble" economy of the 1980s burst.

On the last day of trading in 2007, the Nikkei stood at 15,307.78.

"This year was a total disaster," said Tsuyoshi Nomaguchi, strategist at Daiwa Securities in Tokyo. "Nobody expected it to fall as much as it did."

The world's No. 2 economy has long relied on exports to drive growth, but ever-increasing reliance on overseas demand proved to be its Achilles' heel this year. Plummeting global demand for Japanese cars and gadgets took a heavy toll on exporters like Toyota Motor Corp. and Sony Corp., both of whom have slashed profit forecasts, scaled back production and pared payrolls.

A stronger yen, which erodes overseas profits, only added to their woes.

The Japanese currency has appreciated about 20 percent against both the dollar and the euro this year. The yen was trading at 90.30 to the dollar Tuesday.

Toyota, Japan's top automaker, last week forecast its first operating loss in 70 years for the fiscal year through March. The company's shares lost more than half their value in 2008 and Tuesday closed down 1 percent at 2,905 yen.

Shares of Sony Corp. rose 1.2 percent to 1,922 yen but were down more than 60 percent on the year. The Tokyo-based maker of the Walkman and PlayStation is especially vulnerable to the strong yen since about 80 percent of its sales are outside Japan.

Earlier this month, Sony said it would slash 4 percent of its worldwide work force of 185,000 and shutter several plants.

Akira Ishida, equities head at Chuo Securities in Tokyo, said Japanese car makers in particular endured a "very tough year."

"But next year will be even tougher," said Ishida, who predicts Japan will see more layoffs and steeper declines in corporate profits.

Other analysts expressed more optimism for 2009, pinning hopes on incoming US President Barack Obama as well as the impact of economic stimulus measures implemented by major countries around the world.

"I think the economy will start turning a corner in the latter half of 2009," said Nomaguchi of Daiwa Securities.

Tuesday's end-of-year rise marked the fourth straight session of gains, with the recent jump in crude oil prices boosting commodities issues.

Inpex Corp., Japan's top natural resource developer, jumped 5.1 percent to 698,000 yen, and trading house Mitsubishi Corp., which has a large commodities business, added 2.8 percent to 1,238 yen.

Crude prices rose above $40 a barrel Monday in New York as Israel and Palestinian militants exchanged rocket fire and the death toll mounted in the oil-rich region.

Japanese markets will reopen with a half-day trading session on January 5.