Japan Stocks Fall as Yen Strengthens After Abe Stimulus Package

yen

Japanese shares fell for a third day as the yen jumped after details of the government’s stimulus package disappointed investors. Glassmakers and banks led declines.

The Topix index retreated 1.8 percent to 1,277.42 as of 10:08 a.m. in Tokyo, with all but one of the 33 industry groups dropping. The Nikkei 225 Stock Average sank 1.4 percent. The yen traded at 101.23 per dollar after gaining 1.5 percent on Tuesday as a 28 trillion yen ($277 billion) spending package failed to ignite optimism Japan can revive its economy.

“A risk-off mood is coming to the forefront,” said Chihiro Ohta, a senior strategist at SMBC Nikko Securities Inc. in Tokyo. “In Japan, where many companies, especially in the auto sector, are easily affected by currency moves, the strength in the yen weighs on the overall profits for listed firms.”

Japan’s cabinet announced 4.6 trillion yen in extra spending for the current fiscal year, as Prime Minister Shinzo Abe seeks to bolster the economy without abandoning targets for improving fiscal health. The package will include 13.5 trillion yen of fiscal measures, including 7.5 trillion yen in new spending starting this year, and 6 trillion yen in low-cost loans.

Electric-appliance makers and banks were the biggest drags on the Topix, while telecommunication and trading houses were the only two industry groups that rose.

  • Casio Computer Co. sank 11 percent after lowering its operating profit forecast by 11 percent to 20 billion yen for the half year through June.
  • Mitsubishi UFJ Financial Group Inc. slumped 3.4 percent, the second-biggest drag on the Topix.
  • Honda Motor Co. rose 4.3 percent after posting operating profit that beat analyst estimates.
  • FamilyMart Co. surged 13 percent after the operators of the Nikkei 225 Stock Average said it will add the convenience store operator to its measure.

The stronger yen has increased speculation that the Bank of Japan will cut negative rates further, damping the prospects for banks’ profits, said SMBC Nikko’s Ohta. The Topix Banks Index has tumbled 33 percent in 2016 after the central bank cut rates earlier this year, leaving Japanese shares among the worst performing developed markets. While the central bank’s latest expansion to its stimulus program — almost doubling exchange-traded-fund purchases — boosted shares on Friday, the measure has fallen every day since.

Futures on the S&P 500 Index lost 0.1 percent. The underlying measure fell 0.6 percent on Tuesday, declining the most in four weeks, as sliding crude prices and lackluster consumer spending data revived anxiety that global growth will falter. Oil traded near $40 a barrel in New York following a drop in U.S. stockpiles.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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