* Risk appetite suffers on Obama plan to regulate banks
* Japan shares fall 2.91 percent on resource, export stocks
* Yen reaches nine-month high against euro; 5-wk high vs
dlr
By Raju Gopalakrishnan
SINGAPORE, Jan 22 (Reuters) - Japanese shares <> fell
almost 3 percent on Friday as the yen surged and resources
shares dropped after U.S. President Barack Obama threatened
tough new restrictions on banks, sending jitters across
markets.
Other Asian markets were also badly hit by the U.S.
proposal, which would squeeze banks' profits. South Korea's
KOSPI <> was down 1.87 percent while Australia's main
index <> was down 1.88 percent.
Commodity prices were also down, with gold <XAU=> under
pressure because the proposed regulations were seen as
diminishing capital flows from banks, which have provided
liquidity for investors.
Shanghai copper was expected to open lower after
three-month copper on the London Metal Exchange <CMCU3> tumbled
to a four-week low on Thursday, while crude oil <CLc1> slid on
a build-up in U.S. gasoline inventories.
U.S. stocks fell as much as 2 percent, the worst one-day
percentage fall since October, as financial shares in
particular were hit by President Barack Obama's plan to
restrict banks' ownership and investment in hedge funds for
proprietary profits, which go to the banks themselves, not
customers.
The rules would restrict some banks' most lucrative and
risky operations, which Obama blames for helping to cause the
global financial crisis. See [] for more.
"Of course, any sort of market regulation isn't good for
the market, and if you start limiting hedge funds that hurts
overall market flexibility," said Kenichi Hirano, operating
officer at Tachibana Securities in Tokyo.
"I don't think the proposal is very realistic and it's hard
to know if it'll ever come to pass, but investors want to wait
and see. Today's response is largely just a shock reaction."
Other factors were in operation in Tokyo as well.
Toyota Motor Corp <7203.T> lost 3.3 percent to 4,050 yen
after it said on Thursday it would recall 2.3 million vehicles
in the United States to fix potentially faulty accelerator
pedals, broadening a recall that already ranked as its largest
ever.
Shares of Shin-Etsu Chemical <4063.T> lost 6 percent to
4,940 yen after the world's biggest maker of silicon wafers
used to make semiconductors reported a 53 percent fall in
quarterly operating profit, hurt by weak prices and a strong
yen, and it said it expected its annual profit to halve from a
year earlier.
Earlier, the dollar lost ground and fell to its lowest in
five weeks on the yen <JPY=>, dropping as far as 89.88 yen
before steadying just above 90.00. Support for the dollar is
seen around 88.80/90 yen. []
The euro, which has been under pressure from Greece's debt
troubles, hit a nine-month low against the yen at 126.55 yen
<EURJPY=> but trimmed losses later to 127.20.
The dollar index, however, <.DXY> <=USD> was steady around
78.386, with the 78.45/55 zone seen as short-term resistance.
lnvestors flocked to safe-haven government bonds amid the
equities sell-off. Benchmark 10-year U.S. Treasuries
<US10YT=RR> rose 14/32 of a point in price overnight before
pulling back.
March 10-year Japanese government bond futures rose 0.29
point to 139.27 <2JGBv1>. The benchmark 10-year JGB yield fell
2.5 basis points to 1.315 percent <JP10YTN=JBTC>, pulling away
from a two-month high of 1.365 percent hit earlier this month.
(Editing by Kim Coghill)
