Tokyo Indexes Struggled to Stay Above the Flatline Amid Ongoing Rate Path Worries

Akira Ito
03 Sep, 2024
Tokyo

Benchmark indexes in Tokyo hovered near the flatline as investors looked at the movement in currency trading amid rate path uncertainty. 

The Nikkei 225 stock average fell 0.2%, and the broader market-focused Topix index edged higher by 0.5%. 

Market indexes advanced to a one-month high after the yen dropped to a two-week low as investors debated the next move by the Bank of Japan. 

The Japanese yen has been one of the most volatile currencies in 2024 after the Bank of Japan ended its negative rate policy and laid the groundwork for additional rate hikes in the near future. 

Currency speculators have been forced to unwind their decade-long carry trade as the yield gap between the Japanese government bonds and U.S. Treasury notes begins to narrow. 

However, stronger yen also depresses earnings of export-driven industrial and automobile companies. causing additional headwinds for the stock market. 

Currency traders, who only a month ago were estimating the Japanese yen to weaken to 165 against the dollar, are now looking for the yen to rise to as high as 135. 

The sharp reversal in market sentiment came about after the Bank of Japan shifted its stance to hawkish and held out for additional rate hikes in the imminent future. 

The policy committee of the central bank is scheduled to announce its rate decisions at the end of the two-day meeting on September 20. 

Investors are hoping that the central bank may differ its plan to raise rates after the latest manufacturing data showed a weak trend. 

 

Japan Stock Movers 

The Nikkei 225 stock average declined 0.2% to 38,618.76, and the Topix index rose 0.5% to 2,729.96. 

Industrial companies traded down amid the uncertainties linked to the yen, and semiconductor equipment makers edged lower amid high valuation worries. 

Advantest decreased 2.2% to ¥6,652.0, Tokyo Electron declined 1.5% to ¥25,145.0, Lasertec decreased 3.4% to ¥25,145.0, and Screen Holdings jumped 0.06% to ¥10,615.0. 

Fanuc Corporation decreased 0.8% to ¥4,262.0, Kawasaki Heavy Industries fell 2.2% to ¥5,205.0, IHI Corp. declined 0.4% to ¥6,661.0. 

Toyota Motor decreased 0.3% to ¥2,772.0, Honda Motor declined 0.4% to ¥1,604.50, and Nissan Motor edged up 0.4% to ¥429.60. 

Banks traded higher amid speculation that the Bank of Japan is more likely to differ its rate path later in the year following the weak manufacturing survey data. 

Mitsubishi UFJ Financial Group gained 3.3% to ¥1,599.0, Sumitomo Mitsui gained 3.2% to ¥9,910.0, and Mizuho Financial Group gained 2.2% to ¥3,137.0.