TOKYO — The apparent suicide of a 38-year-old Japanese venture capitalist has added a sinister aura to the investigation into the tangled dealings of Takafumi Horie, the brash Internet entrepreneur at the center of a drama that has roiled stock markets.

The body of Hideaki Naguchi, a former executive with Horie's multibillion-dollar Livedoor Co. online empire, was discovered last night in a business hotel in Naha, Okinawa, 1,000 miles south of Tokyo. Media reports said he had slashed his wrists.

Naguchi left Livedoor in 2002 to join H.S. Securities Ltd., which handled mergers and acquisitions business for Livedoor, according to Japanese media reports. The securities company's offices were among those raided earlier this week when prosecutors launched an investigation into whether some Livedoor deals broke securities laws.

News of the suicide added even greater sensation to an affair the Japanese are calling the "Livedoor Shock."

The investigation triggered a collapse in the value of Livedoor shares — the company has lost about a third of its $6.3 billion value. Panic selling spread to the rest of the Tokyo exchange, knocking billions of dollars off stock values and humiliating the world's second largest exchange.

The plunge ended today as investors steadied their nerves.

After losing almost $400 billion in value over the past three days — more than the annual gross national income of Switzerland — the Tokyo Stock Exchange recovered today. The Nikkei Index ended at 15,696.28, up 355.10 points, or 2.3 percent.

The Tokyo market's recovery eased fears that Japan's woes could spread to other markets.

"Overall, the Japanese economy remains stable and corporate performance is expected to be steady, so this incident is accidental and temporary," said Satoru Otsuka of Mizuho Research Institute in Tokyo.

Livedoor says its own internal investigation shows it broke no securities laws.

But Japanese news reports say investigators are looking at other Livedoor deals, as well as whether the company concealed losses.

The affair has become a proxy battle for a much larger struggle between competing business cultures in Japan.

Horie and Livedoor are the most visible exponents of a new breed of Japanese entrepreneur, with no patience for the customs of a cautious and cozy business establishment. It is a clash that has been stoked by Horie's rock-star lifestyle of private jets, actress girlfriends, and such eagerness for publicity that he appears on TV quiz shows and writes his own Internet blog.

Horie's popularity has been a driving force in popularizing stock trading in Japan, where the phenomenon of day traders is relatively new. Day traders, many of whom use Livedoor's Internet portal, were credited with helping push the Nikkei index up by more than 40 percent last year, and were also among those who tried to bail out of Livedoor stock when news of the raid hit this week.

It is still unclear what triggered the current investigation into Livedoor's dealings. But the raids have spawned consequences that have gone far beyond one man or one company.

Most damaging was the Tokyo exchange's inability to handle the volume of sell orders, resulting in a plea yesterday for brokerage houses to slow down and consolidate their sell orders.

Times staff writer Tom Petruno contributed to this report from Los Angeles.