Nikkei in Tokyo Drops 1.7% as China Lifts Rates

Chandrasekhar Atreya
20 Oct, 2010
New York City

Japanese stocks fell sharply after China increased interest rates in a surprise move overnight. Chinese Premier plans to meet leaders of Japan and South Korea in Vietnam. Japan steps up monitoring of funds managed by securities industry.

[R]5:00 PM Tokyo, Japan – Japanese stocks fell sharply after China increased interest rates in a surprise move overnight. Chinese Premier plans to meet leaders of Japan and South Korea in Vietnam. Japan steps up monitoring of funds managed by securities industry.[/R]

Tokyo stocks fell sharply Wednesday morning to a one-month intraday low after China raised interest rates for the first time in nearly three years and U.S. banks may be forced to buy back depressed mortgage securities and book large losses. The index fell the most in the Asia region with a decline of 1.7%.

The Nikkei 225 Stock Average fell 1.65% or 157.85 to close at 9,381.60. The broader Topix lost 1.2% to 823.69. The yen closed at 81.23 to a dollar.

Of the 225 stocks in the Nikkei index, only 13 gained, 203 decreased and 9 were unchanged.

Bank of Japan Deputy Governor Kiyohiko Nishimura said Wednesday the central bank should focus on the outlook for prices, rather than just looking at short-term movements, to achieve price stability in the long-term.

“To achieve price stability, it is necessary to pay attention not only to the short-term inflation rate at the moment, but also to the forecast of how the future inflation rate will develop and to consider its consistency with the central bank’s understanding of medium-to long-term price stability,” Nishimura told business leaders in Hiroshima, western Japan.

Chinese Premier Wen Jiabao will meet with the leaders of South Korea and Japan at the 13th China-Association of Southeast Asian Nation’s Summit in Vietnam on October 28 to 30, Ministry of Foreign Affairs spokesman Ma Zhaoxu said Wednesday.

Mazda Motor Corp said Wednesday it had improved the fuel efficiency of its mainstay Demio subcompact to 30 kilometers per liter, on par with that of hybrid vehicles, and said it will release the new car in Japan next year.

In a bid to bolster international competition, Japan should explore the idea of joining the Pacific free trade zone under negotiation by nine nations including the U.S., Foreign Minister Seiji Maehara said Tuesday.

“The pillar of economic diplomacy is opening the nation,” Maehara told a symposium co-sponsored by Nikkei Inc and the U.S. Center for Strategic and International Studies.

Aiming to block and stop misappropriation of client assets by funds that invest in specific businesses, the securities regulator on Tuesday proposed that the Financial Services Agency tighten disclosure rules.

Securities and Surveillance Commission’s inspections of fund operations launched since the fiscal year 2009, it has recommended disciplinary action against 15 of the 35 firms it examined. It found problems with a total of 25 of funds.

The underreporting of imports that resulted in payment of less customs duty and consumption taxes reached a record 4,356 cases in the 2009 business year, the Ministry of Finance said Tuesday.

Resulting tax payments and additional penalties climbed to a record 14.5 billion yen in the year, between July 2009 and June 2010. The Customs and Tariff Bureau attributed the surge in cases to complex tax filings resulting from tougher tax probes and an increasing number of transactions.

Sales rebates paid by Japan’s three largest carmakers to U.S. dealers have increased to all-time highs, raising concern of a drop in their earnings.

Honda Motor Co, Nissan Motor Co and Toyota Motor Corp together paid an average rebate of $2,291 a vehicle in the April-September period, up 27% from a year earlier.

Rakuten Inc, Japan’s online shopping operator, asked Japan’s Fair Trade Commission to review an internet search partnership between Yahoo! Japan Corp and Google Inc, saying the deal may deter competition.

“The partnership deserves careful consideration because there is a real possibility that the industry’s overall growth could be adversely affected,” said Hirotoshi Kato, a spokesman at Tokyo-based Rakuten.

Gainers & Losers

Oki Electric Industries led gainers in the Nikkei with a rally of 7.81% to 69 yen followed by Nippon Soda Co 4.65% to 360 yen, Mizuho Securities 2.66% to 193 yen, Toshiba Corp 1.96% to 417 yen, Mazda Motor Co 1.44% to 212 yen and Taisei Corp 1.15% to 176 yen.

Sumitomo Osaka led decliners in the index with a fall of 4.03% to 143 yen followed by Mitsubishi Logistics 3.7% to 988 yen, Sumitomo Metals and Minerals 3.61% to 1,335 yen, Resona Holdings 3.59% to 645 yen, Toyobo Co Ltd 3.52% to 137 yen and Toyota Tsusho 3.5% to 1,268 yen.