Nikkei Recovers to 1.4% Fall; Record Yen

Nigel Thomas
17 Mar, 2011
New York City

Stocks in Tokyo in a roller coaster ride dropped as low as 5% after a cautious statement from an American official prompted a sell off in the yen. The yen surged to a post World War II record. Insurance carriers fell and Japanese exporters brace for one month of production loss.

[R]5:00 PM Tokyo – Stocks in Tokyo in a roller coaster ride closed lower after a cautious statement from an American official prompted a sell off in the yen. The yen surged to a post World War II record. Insurance carriers fell and Japanese exporters brace for one month of production loss.[/R]

Stocks in Japan in a roller coaster ride dropped as much as 5% today but the benchmark index recovered to close down 1.4% at close. The yen dominated the trading after it traded at a record high in sixteen years and worries of radiation leak persisted.

The investors alarmed after U.S. Nuclear Regulatory Commission Chairman Gregory Jaczko testified to a U.S. House Energy and Commerce subcommittee that “radiation levels are extremely high” and that could hamper the “ability to take corrective measures.”

He also urged that a wider zone of 50 kilometer should be evacuated.

Investors also focused on the upcoming meeting of G7 central bankers and finance ministers and speculated that monetary easing may follow the meeting. However, several market analysts and economists questioned the need of such a measure.

G7 finance ministers and central bankers are scheduled to hold a teleconference 7 a.m. Friday Japan time to discuss the need for any intervention or financial assistance. Japan’s finance minister Yoshihiko Noda and other Bank of Japan officials are expected to join in.

The Nikkei 225 Stock Average declined 1.4% to 8962.67 and the broader Topix index dropped 0.8% to 810.80.

The stocks are trading at 10% discount to the reported book value where as most stocks in the U.S. and Europe are trading at least 50% premium to the book value. The benchmark index in Greece is trading at a similar discount to the book vale.

Trading volume picked up to 4.1 billion shares but lower than the record 5.9 billion shares on Tuesday.

The yen surged to 76.26 to a dollar and returned to close to 79.30 after comments from an American officials prompted more caution. The yen crossed the previous high 79.75 last reached in April 1995.

The cash yield on the 10-year Japanese government bonds declined 2 basis points to 1.2%.

Stock Movers

Tokyo Electric Power declined 13% after recovering from the earlier fall of 22% to closed at 798 yen and was the most active stock in Japan.

Insurance companies also declined. Tokio Marine Holdings declined 3.3%, NKSJ Holdings Inc fell 3.4% and MS&AD Insurance Group Holdings Inc dropped 1.7%.

Exporters led the decliners on the worries that rolling blackouts, record high yen and radioactive leakage from a nuclear plant will affect production. Several automakers and electronics companies are bracing for one month of production loss.

Construction companies gained for the fourth day this week. Kajima Corp increased 2.6% to 236 yen and Taiheyo Cement Corp added 2.5% to 118 yen.