BoJ Holds Rates, Nikkei Drops to 3-Week Lows, Yen Weakens to 5-Month Low

Akira Ito
19 Dec, 2024
Tokyo

Stock market indexes in Tokyo fell sharply after investors reviewed rate decisions from the Bank of Japan and the U.S. Federal Reserve. 

The Nikkei 2225 stock average declined as much as 1%, and the broader Topix index dropped 0.4% before recovering some of the losses in the session. 

The Bank of Japan held its policy rate around 0.25%, the highest level since 2008, citing that Japan's economy is on a moderate recovery driven by improving corporate profit and business spending, but the growth in industrial profits and exports is lagging. 

The policy committee estimated annual consumer price inflation to range between 2.0% and 2.5%, driven in large part by service inflation. 

The U.S. Federal Reserve lowered its fed funds rates range by 25 basis points to between 4.25% and 4.50% and signaled possible rate cuts totaling 50 basis points in 2025, compared to the previous estimate of as much as 100 basis points expected last quarter. 

Following the rate decisions announcement, the S&P 500 index dropped 3% and the Nasdaq Composite plunged 3.5%.

Benchmark indexes in Tokyo spent the entire session in negative territory after the Fed's hawkish outlook and confirming that the central bank is struggling to bring down inflation to its target rate of 2%. 

The Japanese yen faced renewed selling pressure after the BoJ postponed its rate hike and raised the possibility of the central bank waiting till the end of the annual spring wage negotiations. 

 

Japan Stock Movers 

The Nikkei 225 Stock Average decreased 0.7% to 38,813.58, and the broader Topix index fell 0.2% to 2,713.83. 

Tech stocks led the decliners, but banks and shipping companies led the gainers in Tokyo trading. 

Advantest Corp. declined 0.8% to ¥8,690, Tokyo Electron decreased 1.4% to ¥23,450, Screen Holdings jumped 0.7% to ¥9,301, and SoftBank Group fell 4.4% to ¥9,025. 

Nissan Motor Co. Ltd. jumped 6.5% to ¥444.80 and extended two-day gains to over 27% after the company entered into merger talks with Honda Motor. 

Honda Motor Co. Ltd. decreased 1.9% to ¥1,220 and extended two-day losses to over 10%.

Mitsubishi Motors Corp corrected 3.8% to ¥469.0 after surging more than 15% in the previous session on speculation that the company may join the amalgamation talks between Honda and Nissan. 

Banks and financial services providers advanced after the Bank of Japan held steady its policy rate and signaled future rate hikes are likely to be "gradual." 

Sumitomo Mitsui Financial jumped 2.3% to ¥3,744, Mitsubishi UFJ Financial Group advanced 1.2% to ¥1,834.50, and Mizuho Financial Group jumped 2% to ¥3,857.0. 

Kawasaki Kisen Kaisha Ltd. jumped 2.4% to ¥2,142.50, Mitsui O.S.K. Lines added 1% to ¥5,280, and Nippon Yusen KK inched up 1.8% to ¥5,122.0.