Shares in Japan continued their downward spiral on Wednesday as the merry-go-round of heavy selling on world stock markets moved back to Asia.

For more than a week now, investors have found it difficult to find any reason to buy stocks, as economic data from the US and elsewhere - and the threat of war on Iraq and soaring oil prices - has made pessimism the safe option.

By the close in Japan, the main Nikkei 225 index was 1.7% lower at 9,165.41 points.

Support for banking shares waned after early buying was triggered by rumours that the Bank of Japan will kick off its buying of shares from the hard-pressed banks as early as October.

Yet more lows

Falls on Wednesday were seen as inevitable after Wall Street touched fresh four-year lows the night before.

The blue-chip Dow Jones index finished at 7,683, down 2.4%.

The declines in Tokyo were across the board, with fallers outnumbering risers by more than three to one and the Nikkei drifting back towards 19-year lows marked earlier in September.

Among the main sufferers were mobile phone giant DoCoMo, which slid as much as 4% before clawing its way back.

Games company Sega fell almost 7%, while Toyota - stung by fears about exports to the US and slowing sales - dropped 2.5%.

And Tepco, the country's biggest power utility, sank 2.4% as revelations that it concealed problems with its nuclear reactors sank in.

Hope springs

But there was light at the end of the tunnel - at least as far as today is concerned - for the beleaguered banking sector.

Reports in the morning papers suggested that the Bank of Japan's controversial plan to buy part of their share portfolios to alleviate pressure on capital adequacy ratios could start as earlya s October.

For Mizuho, the world's biggest bank by assets, the result was a 2% gain.

And selected technology stocks were also in demand after Mitsubishi Electric confirmed rumours that it is considering a memory chip tie-up with its larger rivals NEC and Hitachi.

Mitsubishi was 1% higher, while NEC and Hitachi each added more than 3%.