Nikkei Plunges 1.5% After BoJ Holds Firm

Nigel Thomas
12 Jul, 2012
New York City

Stocks in Tokyo fell for the sixth day in a row after the central bank held its asset purchase and lending program and offered less than expected aggressive response to revive the economy. The yen traded volatile. Asahi Glass plunged after it lowered its fiscal year operating earnings outlook.

[R]7:00 PM Tokyo – Stocks in Tokyo traded lower for the sixth day in a row after the central bank held its asset purchase and lending program and offered less than expected aggressive response to revive the economy. The yen traded volatile. Asahi Glass plunged after it lowered its fiscal year operating earnings outlook.[/R]

The Nikkei index dropped at the sharpest rate in the month after the Bank of Japan left its asset purchase plan unchanged and offered no new stimulus.

Investors sold financial stocks after what many economists felt that the central bank was less than aggressive and politicians urged the bank to focus on its target of 1% inflation. The Bank of Japan scrapped its plan to pay at least 0.1% interest for the short term bill purchase but kept the size of its balance sheet unchanged.

The Nikkei 225 Stock Average declined 130.99 or 1.5% to 8,720.01 and the broader Topix index decreased 9.80 or 1.3% to 747.49.

The yen traded at 79.21 against one dollar and traded near 97.10 yen against the euro.

In trading, turnover on the main section of the Tokyo Stock Exchange rebounded to 1.84 billion shares but fell short to jump above the average for the year so far.

The Bank of Japan left its policy interest rate range unchanged between zero and 0.1% and tweaked its asset purchase program but kept the total purchase and lending program at 70 trillion yen or $879 billion.

However, the central bank cut its fiscal 2012 economic growth forecast to 2.2% and inflation forecasts to 0.2% from the 0.3% estimate in April and estimated growth in the next fiscal year to decrease to 1.7% and core inflation at 0.7%.

The Bank of Japan tweaked its asset purchase and lending operation after it missed its target for six month operations in the last few weeks and the central bank was forced to buy more short term securities.

The central bank will increase the purchase of select short term securities by 5 trillion yen or $63 billion and reduce by the same amount set aside for the fixed-rate loans.

The yen dropped sharply after the announcement but recovered after market participants digested the details of asset purchase program tweaks and traded at 79.31 against one dollar.

Only few hours before the Bank of Japan announcement, the central banks in Brazil and Korea lowered their benchmark rates and a week after the central banks in China, UK and the euro zone offered more monetary stimulus.

Stock Movers

Asahi Glass Co Ltd plunged 6.6% and dropped to a 3-year low to 483 yen after the glass maker lowered its annual operating income outlook and blamed it on the weak demand in Europe.

Shionogi & Co Ltd increased 4.5% to 1,149 yen after its AIDS treatment drug developed in partnership with GlaxoSmithKline offered superior results in late-stage clinical experiments.

Toyota Motor declined 55 yen to 3,025 yen and Honda Motor Co. plummeted 70 yen to 2,510 yen and Nissan Motor Co Ltd decreased 15 yen to 708 yen.

Sony Corp slumped 24 yen to close at 999 yen and Panasonic Corp closed down 26 yen or 4.5% to 556 yen. Toshiba slipped 7 cents to 283 yen. Olympus Corp added 3 yen to 1,260 yen and Nikon declined 65 yen to 2,285 yen.

Fanuc Ltd dropped 400 yen to 12,110 yen and Canon Inc slipped 20 yen to 3,005 yen.

Machinery makers traded lower after China reported smaller than expected increase in imports. China is also set to release GDP data later in the week.

Komatsu Ltd slumped 67 yen to 1,734 yen and Hitachi Construction Machinery Co declined 29 yen to 1,329 yen.

Yamada Denki edged down 0.1% to 3,565 yen. Nitori Holdings Co closed unchanged at 7,470 yen, apparel retailer Shimamura gained 1% to 9,430 yen and Sagami Co slid 1.7% to 113 yen.

Marushohotta Co closed unchanged at 46 yen and Edion Corp decreased 3.7% to 359 yen.

Fast Retailing Co. declined 140 yen to 15,290 yen and J. Front Retailing Co. Ltd rose 3 yen to 427 yen.

Kajima Corp added 2 yen to 232 yen and Taisei Corp fell 2 yen to 220 yen. Sekisui House Ltd decreased 1% to 759 yen and Daito Trust Construction Co Ltd slid 0.7% to 7,490 yen.

Tokyo Tatemono Co., Ltd fell 4 yen to 276 yen and Mitsui Fudosan slumped 32 yen to 1,462 yen and Sumitomo Realty & Development Co. dropped 41 yen to 1,845 yen.

Kansai Electric Power Company, Inc slipped 15 yen to 901 yen and Tokyo Electric Power decreased 4 yen to 146 yen.

Inpex Corp fell 0.2% to 436,000 yen and Japan Petroleum Exploration Co. rose 3 yen to 2,961 yen.

Mitsui O.S.K. Lines, Ltd slipped 11 yen to 253 yen; Kawasaki Kisen Kaisha, Ltd closed down 1 yen to 125 yen and Nippon Yusen K.K. decreased 10 yen to 189 yen.

Mitsubishi UFJ Financial Group slid 7 yen to 379 yen and Sumitomo Mitsui Financial Group plummeted 54 yen to 2,546 yen. Nomura Holdings, Inc slipped 7 yen to 269 yen.

Credit Saison Co Ltd advanced 30 yen to 1,752 yen.

Nippon Steel fell 3 yen to 164 yen and JFE Holdings Inc declined 37 yen to 1,142 yen.