Tokyo, other Asian markets tumble

The focus in Japan now is on Koizumi and the size of any extra budget

TOKYO, Japan -- Tokyo shares ended the morning session down Friday, after figures showing gross domestic product shrank 0.8 percent in the June quarter confirmed the weakness of Japan's economy.

The benchmark Nikkei 225 stock average fell more than two percent, losing 22.74 points to 10,427.59. At one point it touched 10,405.

The broader capital-weighted TOPIX index was down 18.86 points or 1.73 percent at 1,071.88.

Other markets in the region were also weaker. Australia, South Korea, Taiwan and Hong Kong all gave ground.

Australia's S&P/ASX200 was down 1.1 percent to 3232.1 as banks and miners slipped. In Seoul, the Kospi was down about 0.85 percent to 548.77.

Taiwan's Taiex was off 1.3 percent or 56 points to 4282 as tech stocks such as TSMC and UMC slipped. Hon Hai Precision was a rare tech gainer.

Air New Zealand stock tumbled sharply again on worries about its troubled Ansett unit, helping the NZSE Top 40 to a 1 percent fall.

Technology stocks weaker

In Japan, technology-related stocks such as NEC Corp, Sony, Fujitsu and Hitachi were down, taking their cue from the falls on Wall Street Thursday.

The Nikkei is back to the 10,400 level it reached on Monday

The Nasdaq tumbled 3 percent to 1705.64, while the Dow Jones industrial average gave up 1.9 percent or 192 points to 9840.84.

Computer and chip maker NEC slumped 6.65 percent to 1,249 yen, extending Thursday's six percent slide.

Unlike most other big chipmakers in Japan, which recently gave downbeat earnings projections for the year to next March, NEC has yet to release revised full-year forecasts and market players said the market is now pricing in a downward revision.

Consumer electronics giant Sony Corp fell below the 5,000 yen threshold to 4,960 yen, the lowest since March 1999, before rebounding slightly, down 3.82 percent at 5,030 yen.

Extra budget looks likely

Japan's Cabinet Office released figures Friday morning showing GDP in the April-June quarter fell 0.8 percent in real terms from the previous quarter.

This was slightly better than economists' expectations of a 0.9 percent contraction.

Finance Minister Masajuro Shiokawa said after the release of the GDP figures that a draft bill for the extra spending package would likely be drawn up towards the end of October.

"The data came almost within the market's consensus," said Hiroyuki Nakai, manager of investment research at Tokai Tokyo Securities.

"The size of an extra budget is in focus. I think the government should review the current ceiling for new bond issuance of 30 trillion yen -- either allowing more issuance this fiscal year as an exception or widening the ceiling," Nakai said.

Investors waiting for government action

Investors are waiting to see what demand-side steps the government would take to shore up the economy and, especially, the size and contents of the promised extra budget for the current fiscal year to next March.

Major banks fell on the gloomy GDP data. Asahi Bank Ltd was under the heaviest pressure, falling 18.09 percent to 154 yen.

Japanese media reports that Asahi Bank has decided to skip its interim dividend for the half-year to September put the bank's financial health in the spotlight.

The stock market's slide has become a big headache for banks, which are saddled with vast problem loans stemming from Japan's decade-long economic slump.

The cost alone of handling bad loans may wipe out top banks' annual operating profits, leaving them more vulnerable to the latent losses in their vast stockholdings.

Reuters contributed to this report.