Nikkei Drops 1%; Yen Advances

Chandrasekhar Atreya
11 Oct, 2010
New York City

Stocks in Japan fell after global financial leaders failed to resolve exchange rate spat. China releases the detained employee of Japanese company. Government controlled pension fund plans to expand investment in emerging markets.

[R]5:00 PM Tokyo, Japan – Stocks in Japan fell after global financial leaders failed to resolve exchange rate spat. China releases the detained employee of Japanese company. Government controlled pension fund plans to expand investment in emerging markets.[/R]

Japanese stocks traded lower after world financial leaders failed to resolve exchange rate spat. U.S. and Europe are seeking China to let its currency appreciate. The move resisted by China as the world’s largest economy relies on the exports to sustain its economic momentum.

The Nikkei 225 Stock Average lost 0.99% or 95.93 to close at 9,588.88. Of the 225 stocks in the Nikkei index, 65 gained, 149 decreased and 11 were unchanged. The yen closed at 82.08 to a dollar after the meeting of financial leaders failed to produce an accord.

Japan and the U.S. will work closely in creating a multinational forum for lending stability to the foreign exchange market, Finance Minister Yoshihiko Noda said Saturday.

China and other emerging economies have kept their currencies weak, helping them to maintain current account surpluses. Group of Seven finance ministers and central bankers agreed Friday to call these countries to allow their currencies to float and appreciate.

European central bank board member Mario Draghi criticized Japan’s recent move to weaken the yen and said that it showed that unilateral action in world currency markets is not effective.

Draghi told a press conference held after the IMF and World Bank annual meetings that countries should refrain from manipulating their currencies to solve the current misalignments in world currencies.

A Japanese employee of construction company Fujita Corp, who had been detained by Chinese authorities for allegedly entering a military zone in Hebei Province without permission, arrived in Japan from Shanghai, a day after he was released.

China’s net selling of Japanese government bonds in August nearly matched its purchasers through the first seven months of the year, sparking speculation that China is using its vast foreign exchange reserves for political leverage.

China sold a net of 2.01 trillion yen more in Japanese government bonds in August, an all time high in a month according to balance of payment data released Friday by the Ministry of Finance. It had been a net buyer to the tune of roughly 2.3 trillion yen this year through July.

Japan’s public pension fund plans to invest more in emerging market stocks next summer, as it seeks to expand its portfolio, Nikkei English reported.

The Government Pension Investment Fund plans to revise its guidelines limiting its foreign equities investment to firms in industrialized nations, to include companies in emerging economies like Brazil, Russia, India, South Africa and China, Nikkei reported.

Gainers & Losers

Shinsei Bank Ltd led gainers in the Nikkei with a rise of 6.15% to 69 yen followed by GS Yuasa Group 4.62% to 611 yen, Inpex Corp 3.66% to 439,000 yen, Panasonic Corp 3.43% to 1,176 yen, Isetan Mitsukoshi 3.19% to 971 yen and Mitsubishi Electrical Corp 2.56% to 761 yen.

Casio Computers led decliners in the index with a fall of 6.34% to 606 yen followed by Nitto Boseki Co 4.04% to 190 yen, Toyo Seikan 3.97% 1,453 yen, Shiseido Co Ltd 3.83% to 1,760 yen, Chiyoda Corp 3.77% to 714 yen and Seven & I Holdings 3.71% to 1,975 yen.