Japan’s Nikkei Ends Sharply Lower as Yen Gains on Bets on BOJ’s Policy Tweak (Update 1)

Reuters

12:39 JST, March 7, 2024 (updated at 16:20 JST)

TOKYO (Reuters) – Japan’s Nikkei share average slipped from a record high to end sharply lower on Thursday amid sell-off of chip-related stocks as the yen gained amid growing expectations for the Bank of Japan’s policy tweak.

The Nikkei ended 1.23% lower – its sharpest daily drop since Jan. 26 – at 39,598.71, after hitting a record high of 40,472.11 tracking overnight Wall Street gains.

The broader Topix also reversed course to fall 0.44% to 2,718,54.

“Investors renewed their expectations that the BOJ would end its negative rate policy as early as this month,” said Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Intelligence Laboratory.

Momentum is building for the BOJ to consider ending negative interest rates as soon as this month, with upcoming annual wage negotiations likely to yield bumper pay hikes for the second year in a row.

“Some bullish investors wanted to hold stocks as long as they can but gains earlier in the session prompted them to lock in profits. The cue for the sell-off could have been remarks from a BOJ policy maker,” Suzuki said.

BOJ board member Junko Nakagawa said the economy was making steady progress towards achieving the central bank’s 2% inflation target.

Her comments followed Japan’s Jiji Press’ report on Wednesday that some BOJ board members were likely to say that lifting negative interest rates is reasonable at a policy meeting this month.

The speculation sent the yen to scale a one-month high against the dollar.

The two-year Japanese government bond yield rose to as high as 0.195%, a level not seen since April 2011. JP/

Chip-making equipment maker Tokyo Electron fell 3.89% to become the biggest drag on the Nikkei. Chip-testing equipment maker Advantest lost 4.48%.

Financial shares rose, with Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group rising 0.53% and 1.65%, respectively.