Japan shares declined, with the Nikkei 225 Stock Average posting its first three-day decline since elections were called, as the yen climbed after the Bank of Japan said it will wait a year to add open-ended stimulus.
Nissan Motor Co. and Hitachi Ltd. led declines among exporters after Japan’s currency yesterday rose to its highest since May. Component-maker TDK Corp. lost 4.2 percent on a Nikkei newspaper report that operating profit may fall on weaker demand for smartphones. Nisshin Steel Holdings Co. tumbled 9.7 percent after UBS AG cut its investment rating on the stock. Chiba Bank Ltd. jumped 2 percent after CLSA Asia Pacific Markets recommended buying the regional lender’s shares.
The Nikkei 225 lost 2.1 percent to 10,486.99 at the close of trading in Tokyo, its longest losing streak since the seven days through Nov. 13 before elections were called. Volume on the gauge was 2.4 percent lower than its 30-day average. The broader Topix Index fell 1.5 percent to 887.79, with all 33 of its industry groups sliding.
“The BOJ policy measures were as expected and it was already priced into stocks,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of about $70 billion. “Stocks have been rising without a real break since elections were announced last year, so it’s a good time to do a bit of profit-taking.”
The Topix rose 23 percent since elections were announced on Nov. 14, and last week capped its longest weekly winning streak since 1986 on optimism the central bank will ease policy amid pressure from Abe’s new government. The gauge is trading at 1.06 times book value, compared with 2.05 for the Standard & Poor’s 500 Index and 1.15 for the Stoxx Europe 600 Index.
Japan’s central bank yesterday agreed to set a 2 percent inflation target as urged by Prime Minister Shinzo Abe, while waiting to start open-ended asset purchases until next January. Abe, elected last month on a platform calling for an end to two decades of deflation, pressured the BOJ to commit to consumer-price increases that would raise prospects for higher corporate revenues and tax receipts.
The Bank of Japan meeting “marked yet another faltering step on the path toward reflation,” said David Homan, New York-based director of macro strategy at Credit Suisse Group AG. The decision “leaves a lot of steps still to come. The reality for reflation still looks more like a slow-burning fuse.”
Japan’s currency rose to its strongest against the dollar since May yesterday, and is gaining for a third day today. A stronger yen cuts the value of earnings for exporters.
Nissan, which gets 32 percent of its revenue from North America, sank 2.8 percent to 842 yen. Toyota Motor Corp., the world’s biggest carmaker, fell 2 percent to 4,155 yen. Hitachi lost 3 percent to 524 yen.
Among stocks that fell, TDK sank 4.2 percent to 3,120 yen. Full-year operating profit may fall 30 percent to 5 billion yen on weaker demand for smartphone components, the Nikkei reported, without citing anyone. Analysts had expected operating profit of 8.4 billion yen, according to estimates compiled by Bloomberg.
Nisshin Steel led a decline by steelmakers, tumbling 9.7 percent to 644 yen. The company’s investment rating was cut to neutral as the ordinary steel market worsens, UBS wrote in a report. Kobe Steel Ltd., Japan’s third-largest mill, sank 6.5 percent to 100 yen, while JFE Holdings Inc., Japan’s No. 2 steelmaker, dropped 3.7 percent to 1,634 yen.
Shippers declined after the Baltic Dry Index, a measure of shipping costs, fell for the first time in 14 days. Mitsui O.S.K. Lines Ltd. lost 6.1 percent while Kawasaki Kisen Kaisha Ltd. lost 5.5 percent to 156 yen. Shipping companies fell the most among the Topix’s industry groups.
Chiba Bank advanced 2 percent to 556 yen, its highest close since March 2011, after CLSA raised its rating to buy from underperform. The bank posted the biggest advance on the Nikkei 225.
The 25-day historic volatility on the Nikkei 225 reached 23.48 today, its highest level since December 2011. The Nikkei Stock Average Volatility Index fell 9.7 percent to 20.29, indicating traders expect a swing of about 5.8 percent on the benchmark gauge over the next 30 days.