Japan’s Nikkei Stock Trims Gains as Rising Bets for BOJ Rate Hike, Firmer Yen Weigh (UPDATE 1)

Reuters

12:36 JST, February 5, 2025 (updated at 16:30 JST)

TOKYO (Reuters) – Japan’s Nikkei share average ended marginally higher in volatile trade on Wednesday as the index’s early gains were erased by worries over rising bets for an interest rate hike by the Bank of Japan (BOJ) and a stronger yen.

The Nikkei closed 0.09% higher at 38,831.48, after rising as much as 0.8% in early trade to track Wall Street’s gains. It fell as much as 0.3% during the session.

“The Nikkei narrowed losses and entered a negative territory as the yen strengthened and it never came back to a level it hit earlier in the day,” said Fumio Matsumoto, chief strategist at Okasan Securities.

“The yen rose on growing bets that the BOJ might raise interest rates again earlier than the market expected after data showed a rise in wages.”

Japan’s December inflation-adjusted real wages rose 0.6% year-on-year, thanks to a wintertime bonus bump, posting a second consecutive monthly gain, government data showed.

The yen gained 0.7% in the Asian session to its highest since mid-December 2024 and the Japanese government yields hit new multi-year highs.

A stronger Japanese currency tends to hurt exporters’ shares as it decreases the value of overseas profits in yen terms when firms repatriate them to Japan.

The broader Topix added 0.27% to 2,745.41, supported by a 3.13% gain of Toyota Motor, which raised its full-year operating profit forecast by 9% during the session.

Trading in Nissan Motor was suspended after a local newspaper reported that the automaker has decided to drop plans to merge with rival Honda Motor.

Nissan ended 4.87% lower, while Honda jumped 8.19%.

Game maker Bandai Namco surged 13.73% to become the top percentage gainer on the Nikkei.

Of the Nikkei’s 225 stocks, 98 rose, 124 fell and three traded flat.