Nikkei Drops 2.2%, Yen Advances for Second Day

Hiruki Nakamura
02 Oct, 2013
New York City

Stocks in Tokyo declined and the yen advanced for the second day. Investors focused on the immediate impact of the latest stimulus plan and several economists worried that the proposed sales tax increase will dampen consumer spending.

[R]4:30 PM Tokyo – Stocks in Tokyo declined and the yen advanced for the second day. Investors focused on the immediate impact of the latest stimulus plan and several economists worried that the proposed sales tax increase will dampen consumer spending.[/R]

The Nikkei 225 Stock Average dropped 2.2% to 14,170.49 and the broader Topix index declined 1.5% to 1,175.16.

The yen extended gains for the second day in a row and rose 0.5% to 97.56 against one dollar.

Stocks declined in Tokyo trading a day after Prime Minister Shinzo Abe approved the increase of sales tax to 8% and unveiled a stimulus package of 5 trillion yen that included tax incentives for home purchase and capital spending.

Investors took a cautious but optimistic view of the ongoing budget crisis in the U.S. The U.S. government has suspended all non-essential operations and the government is not expected to reopen at least for few more days.

U.S., the largest economy in the world, generally gets away with large economic blunders and political shenanigans without any penalties. Investors have double standards and they treat larger and developed economies differently from smaller or emerging market economies.

The U.S. government shutdown, if lasted longer than one week, will start impacting the U.S. economic growth in the fourth quarter and consumer sentiment.

Stocks in Review

GS Yuasa Corp increased 4% to 611 yen after SMBC Nikko Securities Inc set a target price of 750 yen.

SoftBank advanced 4% to 7,240 yen and NTT DoCoMo declined 1.3% to 1,546 yen after a report from Goldman Sachs highlighted larger than estimate shortage for Apple’s iPhone models and may be impacting sales at NTT DoCoMo.

Pacific Metals Co declined 6% after the nickel maker was negatively viewed in a report from Bank of America Merrill Lynch.