After falling 1.8 per cent in early morning trade, the Nikkei Stock Average of 225 leading issues recouped the losses to close at 16 ,360.39, up 270.33 points or 1.7 per cent from Friday's finish. "There are some players who think that Hashimoto's resignation may not be such a bad thing after all," said Joanne Chong, an analyst specializing in Japanese affairs at British research house IDEA.

Singapore shares led the losers in regional stocks, with the Straits Times Industrial index closing 3.4 per cent or 37.16 pointslower at 1,053.19. Elsewhere, key stock indices fell 2.7 per cent in Bangkok, 1.7 per cent in Kuala Lumpur, 1.4 per cent in Manila, 1.3 per cent in Hong Kong and New Zealand, 1.2 per cent in Seoul, 1 per cent in Australia and O.8 per cent in Jakarta.

The Singapore dollar ended steady at 1.7255 per US dollar from its close of 1.7288 on Friday. The Malaysian ringgit also firmed at 4.2500 from 4.2550 after Kuala Lumpur announced measures to stimulate the recession-bound economy. The Thai baht, however, fell to 41.850 from 41.755 while the Philippine peso to 42.15 from 42.01 and the Taiwan dollar to 34.481 from 34.402. The Indonesian rupiah was steady around 15,200 from 15,280, and the South Koreanwon was higher at 1,312 from 1,315.

Analyst Chong said Hashimoto's administration was marked by policy contradictions between fiscal reform and the need to stimulate the recession-hit Japanese economy with permanent tax cuts and other measures."When his successor comes in he can brush aside everything else and say,okay, our sole purpose is to put the economy back on track," she added. But she said the market was nervous and volatile, and the yen could face fresh Weakness when US markets open.

Hashimoto quit after his Liberal Democratic Party (LDP) was humiliated in the upper house elections, losing 17 seats and dashing battered Asian countries' hopes that his government could pull the country out of recession. A Japanese recovery is seen as crucial to any rebound by Asian economies hit by currency turmoil since July 1997.

Meanwhile, US investment house Goldman Sachs has said that Hong Kong and Singapore were set to join other Asian economies in contracting this year. In its Asian Economic Quarterly report, Goldman Sachs predicted a negative 2.0-per cent gross domestic product (GDP) growth each for Hong Kong and Singapore in 1998. Malaysian was seen contracting 2.1 per cent and the Philippines by 0.2 per cent.

The worst performers in 1998 would be Indonesia at minus 15 per cent, Thailand at minus 8 per cent andSouth Korea at minus 7 per cent. Growth will be driven by China at 8.2 per cent, Taiwan at 6 per cent and India at 5 per cent. Average 1998 GDP growth for 10 key Asian economies covered by the report would be 2.6 per cent, from 6.4 per cent in 1997 and 7.6 per cent in 1996.