Tokyo follows Wall Street down

The Dow Jones industrial average fell below 10,000 Thursday, sparking a further sell-off in Tokyo Friday

TOKYO, Japan -- Tokyo stocks fell sharply in early trade Friday after steep falls on Wall Street spooked investor sentiment.

The decline of the Dow Jones industrial average below 10,000 in the U.S. saw Japan's benchmark Nikkei 225 average fall 113.09 points or 1 percent to 10,825.36 mid-morning.

At one point the Nikkei dipped as low as 10,698.54.

The early sell-off pushed the broader TOPIX index below the key 1,100 mark for the first time since March 3, 1999. It recovered later in the morning.

Elsewhere in the region, key market indicators in Australia and Korea also fell at the opening.

Australia's S&P/ASX200 was down 39.7 points or 1.2 percent to 3284.7, while in Seoul the Kospi slipped 10.98 points or almost 2 percent to 553.38. Embattled chipmaker Hynix Semiconductor contined to fall.

Japanese household spending, CPI down

The Nikkei stayed below the 11,000 mark Friday, losing about another 1 percent in early trade

The announcement Friday in Tokyo of a further decline in the consumer price index and a fall in household spending in July added to the gloomy mood facing Japanese investors.

"This is the market's way of encouraging the government to quickly come up with policy measures to facilitate structural reforms and to solve banks' bad-loan problems," said Hiroichi Nishi, a general manager at Nikko Securities.

"As long as this gap between the market's expectations and the government's actual policy steps gets wider, stocks will continue its downtrend."

Major banks extended their recent slides. Mizuho Holdings Inc, the world's largest bank by assets, fell 2.08 percent to 470,000 yen, extending its loss of more than 10 percent over the previous two sessions.

UFJ Holdings Inc fell 2.81 percent to 588,000 yen.

Bank shares under renewed pressure

Bank shares are under renewed pressure after Financial Services Minister Hakuo Yanagisawa said this week the outstanding balance of bad loans at major banks would likely remain near current levels through fiscal 2003.

Japanese high-tech stocks followed the U.S. Nasdaq, which lost almost 2.8 percent to 1791.80.

Top chipmaker Toshiba Corp fell 2.99 percent to 616 yen and Advantest Corp, a major manufacturer of semiconductor testing devices, lost 4.24 percent to 6,770 yen.

PC and chipmaker NEC Corp was down 2.97 percent at 1,438 yen, while electronics giant Sony Corp gave up 2.86 percent to 5,430 yen.

Indebted retailer Mycal Corp, down 12.73 percent or 14 yen at 96, was the first section's biggest loser by percentage.

Its shares fell as low as 90 yen at the start of morning trade after Mycal on Thursday confirmed market speculation that it would fail to meet a self-imposed August 31 deadline for reducing its debt to 910 billion yen.

Mycal said its group debt would stand at 1.05 trillion yen at the end of the month -- 140 billion yen higher than planned.

Reuters contributed to this report.