5:00AM New York, 7:00PM Tokyo - Nikkei falls to 26-year low on rising yen. Mitsubishi UFJ Financial Group is likely to raise one trillion yen.

Japan market averages fell to a 26-year low led by exporters and financial stocks as the yen rose to a 13-year high against the U.S. dollar. Mitsubishi UFJ plunged 15%, Mizuho Financial dropped 15% and Sumitomo Mitsui declined 11% on the worries that they may need to raise more capital.

The decline in stocks forced investors to withdraw their positions from emerging markets and unwind their holdings from high-yielding riskier assets abroad.

The yen has risen 19% against the dollar this year forcing Canon and Mitsui O.S.K. Lines to cut their earnings forecast.

Market Sentiment

In Tokyo trading Nikkei 225 declined 6.4% or 486.18 to 7,162.90, falling the most since October 1982, and the broader Topix Index dropped 7.4% or 59.65 to 746.46.

In the first section of the Tokyo Stock Exchange 12.4 billion shares worth 904 billion yen were traded and in the second section of 135 million shares worth 1.5 billion yen changed hands.

Of the Nikkei 225 index stocks 13 rose, 210 declined, and 2 were unchanged. Yahoo! Japan Corp led advancers in the index shares.

G-7 Warns Against Rising Yen

G-7 industrialized nations today warned in an unscheduled terse statement that a volatile yen will adversely affect financial markets and the global economy.

The yen gained to a 13-year high at 92.72 yen against the dollar and surged to 58.36 Australian cents as the drop in equity prompted investors to withdraw their positions from emerging markets.

The yen has risen 19% against the U.S. dollar this year.

Finance Minister Shoichi Nakagawa said the government is prepared to intervene to rein in on a rising yen.

Japan last intervened in the currency market in 2004.

Emerging economies affected by the withdrawal of capital inflows are resorting to the International Monetary Fund for assistance. Ukraine, Iceland, Pakistan and Poland have sought assistance from IMF.

Separately, the Nikkei News reported that Prime Minister Taro Aso ordered government to draft emergency measures to allay fears in the financial markets.

Mitsubishi UFJ to Raise One Trillion Yen in Share Issue

The Nikkei News reported yesterday that Mitsubishi UFJ Financial Group might raise one trillion yen or nearly $11 billion by the end of the year to boost its capital base and provide capital against possible bad loans and increase lending to small businesses.

MUFJ plans to raise the 600 billion in common stock offering in the next 12 months through public offering of common stocks and 400 billion in preferred shares directly to institutional investors in private placement.

The common stocks will be offered internationally.