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Japan's stockmarket rebounded by more than 6% today, recovering almost all the losses it suffered yesterday when the Nikkei benchmark index plunged by 6.36% to its lowest level in 26 years.
Having briefly dipped below the 7000 mark, the Nikkei recovered to rise 6.41% to 7621 as investors snapped up bargain shares in Sony, Honda and Toyota, which were among the highest-profile victims of yesterday's turmoil.
Earlier in the day the Nikkei lost as much as 2.3% to 6994, the first time it had entered the 6000 zone since October 1982.
But there was more misery for Japan's banks. Mitsubishi UFJ financial group, the country's biggest bank, saw its shares slide again a day after it said it would raise about $10bn in fresh capital through new share issues. Other Japanese megabanks are expected to follow suit.
In Hong Kong, the Hang Seng index repeated the Nikkei's recovery, jumping 14.35% to 12596 after losing 12% yesterday. South Korea's Kospi rose 5.57% to close at 999, but indexes in Australia and New Zealand both closed lower.
The yen also eased slightly, a day after the G7 group of major industrialised countries issued a statement expressing concern over the currency's recent dramatic gains against the dollar, the euro and other currencies. The dollar rose to ¥95.51 from ¥93.01 in late trading in New York.
The Japanese currency, which reached a 13-year high of ¥90.89 against the dollar late last week, has gained 14% against the US currency and 28% against the euro this month.
Shoichi Nakagawa, the finance minister, refused to comment on speculation that Japan is about to intervene to drive down the yen, saying he believed the G7 statement had so far calmed currency market volatility. He said a proposed ban on short selling due to go into effect early next moth would be brought forward to today.
"I decided on the measure because these next few days will be critical and stock exchanges are facing risks unless we take quick action."
The strength of the yen and slump in demand forced yet another major exporter to revise its outlook for the coming months. Honda cut its net profit forecast for the year through to the end of March to ¥458bn, down 19% from last year. The revision highlights the havoc the soaring yen is wreaking on Japanese firms' balance sheets: Honda reckons that every ¥1 fall in the dollar wipes ¥20bn from its operating profit.
The car maker also said it would slash vehicle production by 10% at its UK plant in Wiltshire for four months from December, but added that the plant's 4,800 jobs were safe.
The deepening financial turmoil means Japanese voters may have to wait until early next year to go to the polls. Taro Aso, the prime minister, reportedly said today he would put off a general election expected late next month to deal with the crisis.
"We cannot create a political vacuum at this time," Kyodo news agency quoted him as telling colleagues. "I will put economic and financial measures first."
The government, which this week indicated it would inject trillions of yen into struggling banks, is expected to unveil an emergency economic stimulus package on Thursday.
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