Japan’s Nikkei Stumbles on Profit-Taking, Hawkish BOJ Tilt (Update 1)

Reuters

12:55 JST, January 24, 2024 (updated at 16:00 JST)

TOKYO (Reuters) – Japan’s Nikkei share average fell on Wednesday as profit-taking continued from the last session, while traders interpreted the tone at the latest Bank of Japan (BOJ) meeting as hawkish.

The Nikkei fell 0.8% to36,226.48, further edging down from a fresh 34-year peak of 36,984.51 hit on Tuesday and erasing gains from the week thus far.

The index dipped as it saw selling continue from the previous afternoon session as traders moved to lock in gains following a world-beating surge so far this year.

The broader Topix fell 0.51% to2,529.22.

Investors were also weighing the latest communication from Japan’s central bank, which concluded its two-day monetary policy meeting on Tuesday to leave its ultra-easy monetary policy unchanged.

Comments by the BOJ’s chief and a new phrase added to the bank’s quarterly outlook that the likelihood of sustainably achieving the bank’s 2% inflation target was gradually increasing came across as “relatively hawkish,” said Hiroshi Namioka, chief strategist at T&D Asset Management.

Growing conviction that conditions for phasing out the BOJ’s huge stimulus were falling into place suggested that an end to negative interest rates may be in sight, possibly as soon as March.

“I think the stock market believed the meeting would be pretty uneventful… so the market took that (hawkish content) as a negative,” said Namioka.

In response, the real estate sector index, which tends to be sensitive to interest rate increases, fell 2.84% to sink to the bottom of the Tokyo Stock Exchange’s 33 industry sub-indexes.

Real estate firms Mitsui Fudosan and Mitsubishi Estate were the worst performers of the day, losing 4.18% and 3.84%, respectively.

The banking sector, on the other hand, climbed 4.2% to sit firmly at the top of the industry sub-indexes.

Meanwhile, the tech sector’s continued strong performance on Wall Street buoyed Japan’s chip-related shares, with heavyweight Nikkei stock Tokyo Electron eking out 0.62% in gains, while Advantest gained 1.24%.