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Sep 12, 2007

TOKYO - Japanese stocks fell Wednesday after Prime Minister Shinzo Abe announced plans to resign after a string of damaging scandals and a humiliating electoral defeat.

The benchmark Nikkei 225 index dipped 80.07 points, or 0.50 percent, to close at 15,797.60 points on the Tokyo Stock Exchange. The index added 0.72 percent to finish at 15,877.67 on Tuesday.

The broader Topix index, which includes all shares on the exchange's first section, shed 4.12 points, or 0.27 percent, to 1,528.27 points.

Tokyo stocks initially rallied after the first media reports that Abe intended to step down came early in afternoon trade, but soon retreated.

"Abe's resignation would mean that policy decisions regarding such matters as the budget deficit and the possibility of a consumption tax hike will be up in the air for a while," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Securities. "This is absolutely negative to the stock market," he said.

Others said Abe's exit could prove positive in the longer term, if it clears the air and allows the ruling Liberal Democratic Party to stabilize after a series of political missteps.

For the near term, traders said, uncertainty is likely to weigh on Japan's financial markets, compounding ongoing concerns over the U.S. credit crisis.

"Tokyo shares will probably have to go through a double whammy of the resignation news and the U.S. subprime woes for a while," said Hiroaki Kuramochi, head of cash equities department at Bear Stearns in Tokyo.

Banks were the main losers on the day; Mizuho Financial Group fell 2.4 percent to $5,687.

Other decliners included Shin-Etsu Chemical Co., down 3.51 percent to $67; Sony Corp., off 0.37 percent to $47; and trading company Marubeni Corp., down 2.35 percent to $7.64.

Real estate companies were among the winners, with Sumitomo Realty & Development Co. adding 1.82 percent to $29.40. Toyota Motor Corp. edged up 0.31 percent to $56.61, and Mitsubishi Electric Corp. added 3.57 percent to $12.19.

Secondhand comic book store operator Mandarake Inc. soared 12.95 percent on speculation that Taro Aso, the comic-book loving secretary-general of the ruling Liberal Democratic Party, may become the new prime minister.

In currencies, the dollar was trading at 113.94 yen at 2:50 p.m. Wednesday, down from 114.30 yen late Tuesday in New York. The euro rose to $1.3868 from $1.3832.


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