Nikkei Extends Two Week Losses to 11% Amid Rate Path Uncertainty, Tokyo Area Inflation Accelerates

Akira Ito
26 Jul, 2024
Tokyo

Stocks in Tokyo extended losses for the eighth session in a row as investors unwind artificial intelligence-linked bets. 

Investors stayed on the sidelines ahead of the Bank of Japan's monetary policy decisions on July 31 amid rising optimism that the central bank may be ready to lift rates and significantly cut its government bond purchase plan. 

The Nikkei extended weekly losses to 5.1% and the Topix fell 2.9%, and both indexes fell for the second week in a row. 

Moreover, Tokyo area core inflation accelerated for the third month in July, the Ministry of Internal Affairs reported Friday. 

Core inflation, which excludes fresh food prices, increased to 2.2% from 2.1% in June as the ending of the government subsidy increased energy prices by 19.7% from a year ago. 

Food prices rose at a slower pace, and hotel price inflation weakened as the government ended its subsidies a year ago and demand from foreign tourists supported the price increase. 

Tokyo area inflation is seen as a leading indicator of nationwide trend, and Japan's consumer price data are scheduled to be released in about three weeks. 

A day ago, a survey showed service prices in June for businesses soared at the fastest pace in 33 years, stoking broader inflationary pressures. 

However, businesses are struggling to pass higher prices to consumers amid weak domestic demand. 

The yen continued to rally for the second week in a row and traded at 154.24 against the U.S. dollar in the hope that the central bank will start raising rates as early as next week and narrow the wide yield gap between the U.S. and Japanese bonds. 

 

Japan Stock Movers 

Japan stocks declined on Friday and extended weekly losses after losses in technology, shipbuilding, communication, and electric machinery led the decliners. 

The Nikkei 225 stock average declined 0.5% to 37,667.41, and the Topix index dropped 0.4% to 2,699.54. 

Tokyo Electron, Advantest, Renesas Electronics, Screen Holdings, and Lasertec declined between 3% and 6%. 

Hino Motors advanced 12.8% to ¥453.40, Canon gained 6.7% to ¥4,622.0, and Fujitsu Ltd. soared 10.9% to ¥2,700.0.