TOKYO, Oct 9: Japanese share prices slumped to a new 19-year low on Wednesday on fears the government’s aggressive stance on resolving bad loans would cause huge bankruptcies and unemployment, dealers said.

The Tokyo Stock Exchange’s Nikkei-225 average fell 169.56 points or 1.9 per cent to end at 8,539.34 off a low of 8,498.46. It was the benchmark’s lowest close since June 10, 1983 when it closed at 8,500.48.

The Topix index of all First Section issues fell 16.50 points to 844.29.

Volume was estimated at 749 million shares. Decliners outnumbered gainers 1,179 to 210, with 101 issues unchanged.

Construction and property stocks were hit by a report the Financial Services Agency (FSA) would probe the bank-led rehabilitation plans of about 30 companies when it conducts regular inspections of major banks.

Many of the large troubled firms are in the construction, real estate and retail sectors.

“The best thing to do at the moment is take a long holiday. The bank issue is a no-win situation,” said Michael Leichsenring, strategist at UFJ Tsubasa Securities.

“Either the banks continue doing what they’ve been doing, which the market doesn’t like, or they can deal with it more aggressively — which the market doesn’t like,” Leichsenring said.

“It’s incredibly difficult to find anything positive. The shares going down themselves triggers more selling.

“The next technical bottom level (for the Nikkei 225 index) is around 8,400 but in the area we are moving, there is no real bottom,” he added.

“The sectors that were most severely hit have been banks and construction. This is a result of the kinds of statements we’ve seen this morning,” said Jean-Pascal Rolandez, strategist at BNP Paribas, referring to the FSA report.

The possibility that banks could abandon key troubled borrowers, who are major employers, would have a huge knock on effect on even good companies, Rolandez added.

“Until we hear statements which are reassuring that the government doesn’t intend to create pain in the short-term, the market heads south,” he added.

Among property firms, Mitsubishi Estate was down 30 yen at 916 yen and Sumitomo Realty down 35 or 5.4 per cent at 612.

Construction firms were also lower, with Taisei down 12 at 215, or a 5.3 per cent decline, and Shimizu dn eight at 370.

Troubled retailer Daiei nosedived 14 yen or 12 per cent to 103.

Banks were mostly lower, continuing recent sharp declines, with Mizuho down 21,000 at 173,000, UFJ down 19,000 at 175,000, a drop of 10.8 per cent, MTFG up 28,000 at 828,000, and SMBC down six at 505.

“If the government were really to address the (non-performing loan) problem, they will have to nationalise a few, which again the market is not going to like,” said Leichsenring.

Chipmakers were hit by declines in counterparts in the US overnight, with Fujitsu down 21 at 434, NEC down 16 at 464 and Hitachi down 17 at 518. TDK was up 70 at 4,250 after a report it may beat its first half earnings target.

Fujitsu said it was considering many options to build on its alliance with Advanced Micro Devices Inc. but could not comment on a report the two would set up a new venture that would be the world’s largest in the flash-memory sector.—AFP