Stocks slump in Japan

Japanese stocks fell yesterday amid worries that higher taxes and lower public spending would severely affect economic prospects, analysts said. The Bank of Tokyo-Mitsubishi, Nissan Motor Company, Ajinomoto and Seven Eleven Japan led a broad decline, which saw the benchmark Nikkei 225 index drop 257.83 points, or 1.3 per cent, to close at 19,291.58. Banking, food and retail shares were among the biggest fallers.

Meanwhile, food and retailer stocks fared badly after the release of figures showing a decline in November retail sales and anxiety over a planned increase in Japan's consumption tax to 5 per cent from 3 per cent.

At one point in yesterday's trading, the index dropped by 729.5 points, recovering in late afternoon trading.

Analysts said the market was digesting the likely effects of a 77.4 trillion yen budget, passed on Wednesday, which will wipe out income tax rebates and raise sale taxes.