Japan Indexes Trim Morning Gains as the Yen Wobbles

Akira Ito
16 Jul, 2024
Tokyo

Stock market indexes dissipated morning gains after investors returned from a three-day holiday. 

The Nikkei 225 and the broader market index Topix cut morning gains as investors bid up stocks following the overnight gains in New York. 

Market indexes have struggled to resume their advance over the last month amid rate path uncertainty and the Bank of Japan's reluctance to increase rates and shrink the yawning yield gap between the U.S. and Japanese bonds. 

The lack of urgency on the part of the Bank of Japan's policymakers is weighing on the yen as domestic investors shift more attention to higher-yielding bonds and securities overseas. 

The Bank of Japan is expected to announce its monthly purchase plan to trim the current $6 trillion bond purchase, and speculations are high that the central bank will taper the purchase to as low as 3 trillion yen. 

The twin uncertainty of the rate path and the government bond purchase plans continue to drag down the yen, and currency traders are preparing for the yen to drop as low as 170 before it finds its stable bottom. 

The Japanese yen rebounded to 158.64 against the U.S. dollar after the currency declined more than 2% in the previous week. 

Tech stocks were among the leading winners following the gains in the sector in New York, and artificial intelligence-linked stocks led the gainers in Tokyo. 

 

Japan Stock Movers 

The Nikkei 225 stock average gained 0.2% to 41,277.52, and the Topix index added 0.4% to 2,908.24. 

Softbank Group increased 0.2% to ¥11,410.0, and the venture capital fund led a $300 million investment round for the start-up Skild AI, which focuses on the core processes for generative AI. 

Financial stocks were among the leading gainers in Tokyo trading on Tuesday. 

Mitsubishi UFJ, Sumitomo Mitsui, and Mizhuo Financial advanced between 1% and 2%. 

Vehicle exporters were also in focus after the persistent weakness in the yen, which is expected to boost the profits of automakers. 

Honda Motor, Toyota Motor, and Nissan Motor gained between 1% and 2%. 

Taiyo Yuden jumped 9.4% to ¥5,037.0, and the electronics materials maker extended gains for the second week in a row amid expectations of higher sales in the current financial year. 

Murata Manufacturing, Kawasaki Heavy Industry (IHI), Alps Alpine, Fanuc, and TDK gained between 4% and 6%.