Japan's Nikkei index falls 11% in 2007, first loss in 5 years

TOKYO -- Japan's stock market wrapped up a year of jittery trade with a sharp fall Friday, beset by fears about the U.S. economy and worries that global political instability will follow the assassination of Pakistani opposition leader Benazir Bhutto.

The Nikkei 225 index fell 256.91 points, or 1.7%, to 15,307.78 points, closing at the end of the morning session on the final day of 2007 trading.

It's the first time in five years the benchmark ended a year lower than the previous year's close. The Nikkei lost 1,918.05 points, or 11.1%, for the year. In 2006 the benchmark Nikkei gained 6.9%,

The death of Bhutto in Pakistan on Thursday, just ahead of Jan. 8 elections, sent shock waves through global markets because it heightened concerns about stability in the volatile region.

Motomi Hiratsuka, head of portfolio trading at BNP Paribas in Tokyo, said Tokyo shares were hurt by Bhutto's death, which came on top of growing worries about the U.S. economy.

"People are thinking about how global political turmoil may affect growth," Hiratsuka told Dow Jones Newswires.

Also, Japan's market hasn't shaken doubts about the American economy amid the subprime mortgage crisis. Any slowdown in the U.S. is likely to damage Japan's export-dependent economy.

A report from Goldman Sachs that said write-downs at U.S. banks, including Citigroup, Merrill Lynch and JPMorgan Chase, may deepen, helped to squelch investor momentum.

Overnight, Wall Street dipped over the economic and stability concerns, with the Dow Jones industrial average dropping 1.4% to 13,359.6.

Expectations that political instability from Bhutto's assassination will weigh on the U.S. dollar was another factor souring sentiment, said Kenichiro Yoshida, senior economist at Mizuho Research Institute in Tokyo.

The dollar was trading at 113.41 early afternoon, down from 113.69 yen late Thursday in New York. Earnings of major Japanese exporters are eroded by a higher yen, which also makes their goods more expensive and less competitive in overseas markets.