Japan Indexes Plunge Nearly 2% Amid Persistent Yen Weakness and Slow BOJ Response

Akira Ito
17 Jun, 2024
Tokyo

Stocks in Tokyo faced selling pressure in Monday's trading as investors stepped back, reassessed the Bank of Japan's monetary policy decisions on Friday, and reversed gains in the previous session. 

The Nikkei and the Topix indexes dropped as much as 2% on the worry that persistent weakness in the yen in the long term will negatively impact consumer spending and corporate earnings. 

The Bank of Japan held its short-term interest rate steady and said it would continue with its purchase of government bonds at the current level until the next meeting in July. 

The central bank also said it plans to announce the tapering of its bond purchase at the conclusion of the next meeting in July, in a nod to letting the market decide long-term interest rates. 

Governor Kazuo Ueda ended the negative interest rate in March after the central bank kept it in negative territory for 8 years and raised rates for the first time in 17 years. But the wide interest rate gap between the U.S. and Japan has weakened the yen to a 34-year low. 

Japan's core machinery orders, which exclude large and volatile orders for ships and power generation equipment, declined seasonally by 2.9% from the previous month to 885.3 billion yen in April, reversing the 2.9% increase in March. 

Core machinery orders from a year ago rose 0.7% after rising 2.7% in the previous month, the Cabinet Office said. 

Benchmark indexes soared in the first four months, backed by robust corporate earnings and a weaker yen, but the persistent weakness in the yen is now seen as a liability for the economy. 

The yen traded at 157.40 against the U.S. dollar in late afternoon trading in Tokyo. 

In the week ahead, ministries in Japan are set to release international trade balance data and inflation updates this week. 

 

Japan Movers 

The Nikkei 225 stock average declined 1.9% to 38,081.47, and the Topix index dropped 1.7% to 2,700.51. 

Tokyo Electron, Advantest, and Screen Holdings declined between 1% and 3%. 

Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho Financial fell between 1% and 3%. 

Major exporters declined despite the weakness in the yen, and Panasonic, Mitsubishi Electric, Canon, and Sony declined between 2% and 4%.