Japanese Shares Tumble as Further Yen Gains Rattle Market (UPDATE 1)

Reuters

12:38 JST, August 1, 2024 (updated at 16:15 JST)

TOKYO (Reuters) – Japan’s Nikkei share average declined on Thursday as the yen rallied further following the Bank of Japan’s (BOJ) historic monetary policy meeting on Wednesday, while index heavyweights tumbled.

The BOJ raised interest rates to levels unseen in 15 years and announced details on how it will reduce its huge bond buying.

The market didn’t appear to judge the decision as “too hawkish,” and the policy uncertainty that was hanging over the market has been lifted, said David Chao, global market strategist, Asia Pacific (ex-Japan) at Invesco.

But the yen climbed to its highest since mid-March at 148.51 per dollar on Thursday on the back of the BOJ’s decision, after having already recovered from a 38-year low hit in the beginning of July, rattling investors.

“As soon as the yen rose above 150 to the dollar, the market got concerned about the upside of local firms’ profit outlook,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.

The Nikkei briefly fell over 3% before reversing some losses and closing down 2.49% at 38,126.33, snapping three consecutive days of gains.

The broader Topix slid 3.24% to 2,703.69, marking its worst daily performance since March 2020.

Among the worst-hit were stocks of export-related companies, which tend to suffer from a stronger yen when firms repatriate revenues. Fast Retailing, declined 1.3%, and Sony Group Corp, fell 3.3%.

“Japanese equities are likely to remain volatile in the short term until we see a stabilization in the USDJPY (dollar/yen),” UBS SuMi TRUST Wealth Management CIO wrote in a note.

Among individual stocks, earnings releases drew out big winners and losers, with Advantest soaring 13.8% after the firm lifted its full-year operating profit forecast by 53% on Wednesday.

Toyota Motor7203.T declined 8.48% to become one of the biggest drags on the Nikkei, after investors were unimpressed with the 17% rise in first-quarter operating profit the automaker announced during trading.

The transport equipment sector, which includes major automakers, fell 6.6%.