Japan Indexes Extend 2-day Rally, Prime Minister Kishida Plans to Step Down

Akira Ito
14 Aug, 2024
Tokyo

Market indexes in Tokyo extended gains for the second day in a row following a sharp rebound in overnight trading in New York. 

The Nikkei 225 index gained 0.7% and the Topix index advanced more than 1%, driven by a rise in tech and financial stocks. 

Market sentiment recovered for the second day in a row, but enthusiasm was tempered amid lingering worries about the rate path and the appropriate level of the yen-dollar exchange rate. 

Investors have been on edge after the Bank of Japan unexpectedly raised rates at the end of July and signaled more rate hikes to follow, supporting the strengthening of the yen. 

However, investors are still worried that the yen may face renewed pressure because of the large yield gap between the Japanese and U.S. bonds. 

That rate gap could shrink in the fourth quarter if the U.S. Federal Reserve lowers rates by as much as 75 basis points and the Bank of Japan lifts rates by another 25 basis points. 

The yen closed at 147.15 against the U.S. dollar in Tokyo trading. 

Benchmark indexes experienced a wild swing in the last week after the BoJ's hawkish outlook, coupled with economic slowdown worries in the U.S. 

On the economic front, the Reuters Tankan Survey showed business sentiment among manufacturing companies weakened in August amid lackluster demand from China. 

Prime Minister Fumio Kishida informed leaders of the Liberal Democratic Party that he is not planning to seek reelection at the end of his three-year term in September. 

Kishida's move now shifts the focus to younger leaders at the party's election next month. 

 

Japan Movers 

The Nikkei 225 Stock Average jumped 0.7% to 36,495.29, and the Topix index gained 1.2% to 2,584.10. 

Tech and semiconductor equipment makers rebounded for the second day in a row after the Nasdaq Composite jumped more than 2% in overnight trading. 

Advantest, Tokyo Electron, Screen Holdings, Lasertec, and SoftBank advanced between 2% and 4%. 

Mercari dropped 7.4% to ¥2,013.50, and the online marketplace operator signaled challenges in its U.S. operations. 

The company said revenue in the financial year ending in June increased 9% and core operating profit advanced 13% from a year ago, respectively.