Japan's Wage Gains Lag Core Inflation In April, Safety Certification Falsification Scandal Widens

Akira Ito
05 Jun, 2024
Tokyo

Market indexes in Tokyo fell amid a broad market selloff as investors reassessed the rate path outlook and the persistent rate differential between the U.S. and Japan. 

The Nikkei and the Topix index declined more than 1% after banks, tech and industrial companies, and vehicle makers were among the leading decliners. 

Market sentiment was dented after April wage gains lagged inflation, stoking fears of weak consumer spending negatively impacting economic growth in the current quarter. 

Wages in April rose 2.1%, lagging core consumer price inflation of 2.2% in the month as small- and medium-sized businesses struggled to lift wages. 

The Japanese yen edged higher and hovered near 155.73 against the U.S. dollar, reversing the previous week's slide. 

Currency traders are still anticipating the yen to dip to 165 against the dollar due to the persistent yield differential between the U.S. and Japan. 

Moreover, the Bank of Japan is reluctant to lift its interest rates, despite the recent rise in inflation driven by the increase in commodities, energy, and food prices. 

 

Japan Stock Movers 

The Nikkei 225 stock average decreased 1.1% to 38,405.05, and the Topix index declined 1.6% to 38,405.05. 

Tokyo Electron, Advantest, Screen Holdings, and Softbank declined between 1.2% and 3.3%. 

Resource-linked stocks also declined after metals and crude oil prices fell for the second week in a row. 

JFE Holdings, Nippon Steel, and Inpex Corp. fell between 2% and 4%. 

Toyota Motor, Honda Motor, and Nissan Motor fell between 0.7% and 2.8% after the yen edged higher. 

Toyota Motor Corp. declined 2.4% to ¥3,218.0 after the company said it plans to halt the shipment of three models produced in Japan following certification issues and a government raid at its headquarters. 

Honda also fell after the company confirmed that it had falsified safety certification tests after a government action against the company. 

Mazda Motor also temporarily halted shipment of two models after an internal investigation discovered irregularities; however, these models have not been in production since the end of May.