Japan’s Nikkei Slips as Traders Weigh US CPI, Expected BOJ Pivot (Update 1)

Reuters

12:36 JST, March 12, 2024

TOKYO (Reuters) – Japan’s Nikkei share average extended declines on Tuesday as investors made adjustments ahead of U.S. inflation data and weighed stronger expectations that the Bank of Japan (BOJ) could make an historic policy shift next week.

The Nikkei closed 0.1% lower at 38,797.51, rebounding from broad losses in the morning session as dip-buying took hold, but was unable to finish in positive territory.

It was the second consecutive day of declines for the index, after finishing down 2.2% on Monday.

Tech shares, which have greatly contributed to the Nikkei’s 16% gains so far this year, followed their U.S. peers lower as traders eye U.S. consumer price data, due later on Tuesday.

Chip-making equipment giant Tokyo Electron declined 1.7%, while AI-focused startup investor SoftBank Group was down 0.7%.

But losses on the Nikkei were capped due to recovery in some index heavyweights such as Uniqlo parent company Fast Retailing and chip-testing equipment maker Advantest, which rose 1.4% and 0.9%, respectively.

Exporter shares also picked up somewhat after the Japanese currency weakened on the BOJ chief’s slightly less optimistic comments on the economy in the Asian afternoon, although automaker Toyota Motor remained down 0.7%.

The yen has recently gained on expectations that the BOJ could exit negative interest rates at its policy meeting on March 18-19.

The central bank’s decision to not make purchases of Japanese exchange-traded funds (ETF) on Monday despite local shares dropping sharply has further stoked speculation that it will soon end its ultra-easy monetary policy.

“There’s a strong belief in the market that the BOJ will stop buying ETFs when it exits negative rates,” said Maki Sawada, a strategist at the investment content department of Nomura Securities.

That could lead to some repositioning this week as traders await the BOJ’s decision, she said.

Banks and insurance firms, which have seen some of the largest gains year-to-date, slipped 1.9% and 1.6%, as traders made adjustments. Wholesalers lost 1.4%.

The broader Topix finished down 0.4% at 2657.24.