Tokyo shares have fallen again

The benchmark Nikkei share index lost 2.2% to close below 8,000 points for the first time in more than two decades.

The fall came despite a further government reassurances that was poised to prop up shares.

"Depending on the developments in the stock market, we may have to take effective countermeasures without delay," government spokesman Yasuo Fukuda said on Tuesday.

Politicians scramble

A statement by Finance Minister Masajuro Shiokawa earlier on Tuesday had seen Tokyo stocks open firm, despite heavy falls in US shares on Monday.

Mr Shiokawa had said that the Finance Ministry might accelerate budget expenditure, so that most of the next year's spending would fall within the next six months.

"If the government actually hammers out some action aimed at addressing the ongoing supply and demand problems, that will hold the key," said Kotaro Aoki, market analyst at Ichiyoshi Securities

But, as politicians scrambled for ways of supporting shares, comments by Liberal Democratic general council chairman Mitsuo Horiuchi, suggesting an easing of accounting deadlines, sent a shiver through the markets.

The plan would "simply delay" a much needed shake-up at Japan's debt laden banks, Osamu Fujiwara, market analyst at Maruko Daika Securities, said.

"The market did not welcome such a comment from the LDP."

Rebound ahead?

The overall weakness in shares was blamed, as ever, on fears of war against Iraq, and uncertainty as divisions grow between US-UK position towards conflict, and that of Russia, France and Germany.

Trade Minister Takeo Hiranuma said the share fall "did not reflect the fundamentals of the Japanese economy".

"Tensions over the Iraq situations is a big factor."

And some analysts said that shares at current prices represented a good buying opportunity.

"The market has priced in, probably too much, the underlying risk related to the outbreak of a war in Iraq," Mr Aoki said.

"The market has a good chance of rebounding if the uncertainty related to the start of a war in Iraq is removed."

He added: "The best scenario, not only for the Japanese market but also for the global equity markets is no war, of course."

The fall in share prices affected stocks across the board, with fears over the strong yen heightening fears over prospects for exports.