Japan’s Topix index pared losses at the close after earlier falling as the yen surged overnight. Carmakers, developers and paper companies declined while power producers increased.
Toyota Motor Corp., the world’s biggest carmaker, fell 1.8 percent. Mitsubishi UFJ Financial Group Inc., Japan’s No. 1 lender, slid 1.8 percent after lawmakers passed a rule to impose losses on investors of failing financial institutions. Nomura Real Estate Master Fund Inc., Japan’s largest initial public offering this year, sank 6.2 percent on its debut. Tokyo Electric Power Co. surged 7.1 percent as utilities led gains.
The Topix fell 0.4 percent to 1,096.54 at the close in Tokyo, after rising as much as 0.2 percent in the afternoon. The gauge earlier fell 2.6 percent after the yen gained the most in three years overnight as the Bank of Japan yesterday kept policy unchanged. The Topix surged 48 percent this year through May 22 on optimism Japan will emerge from deflation, before plunging and entering a correction on May 30.
“The sell-off from investors who had bought shares on expectations from the Bank of Japan has run its course and bad news has been priced in for now,” said Yoshihiro Okumura, a general manager at Chiba-Gin Asset Management Co. in Tokyo. “But concern over the currency remains, and it’s unlikely shares can rise much right now.”
The Nikkei 225 Stock Average retreated 0.2 percent to 13,289.32, with volume about 37 percent below the 30-day average. Even after the correction, the gauge is up about 28 percent this year, making it the best-performing major equity benchmark globally, according to Bloomberg data.
Carmakers exerted the biggest drag on the Topix today, with Toyota, Honda Motor Co. and Nissan Motor Co. each falling more than 1.7 percent.
The yen rose 2.8 percent to 96.03 against the dollar yesterday, its biggest gain since May 2010, before weakening in the afternoon today. The currency strengthened overnight after the BOJ refrained from extending maturities on fixed-rate loans to banks as a measure to stem bond-market volatility. The Topix lost 1 percent and the Nikkei 225 fell 1.5 percent yesterday.
“We have concluded that we don’t need to have a new tool for now as volatility has been greatly reduced amid our efforts for flexible operations,” BOJ Governor Haruhiko Kuroda said yesterday at a briefing, referring to bond price fluctuations. “We will discuss when needed” any extension to the funding limit, he said, adding that “I haven’t seen the need for it so far.”
The BOJ unveiled a plan on April 4 to buy more than 7 trillion yen ($72 billion) of bonds every month in an attempt to secure 2 percent inflation. Japan’s benchmark bond yield has swung from a record low of 0.315 percent in April to as much as 1 percent since the BOJ announced the policy.
“The Nikkei falling to around 12,000 would be the limit for the government’s patience with the BOJ,” said Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo and formerly of Goldman Sachs Group Inc. “The central bank would come under pressure for further measures such as more easing, longer maturities -- some sort of stronger commitment.”
Financial shares fell, with the Topix gauge tracking banks dropping 1.2 percent, insurers sinking 1.1 percent and developers declining 1.7 percent.
Japan’s parliament today endorsed changes approving so-called bail-in rules that impose losses on shareholders if financial institutions fail, as a way to reduce the burden on taxpayers. The revisions would allow the banks to issue preferred shares that can be converted into common stock or written off if firms become non-viable.
Nomura Real Estate Master Fund, a Japanese real estate investment trust run by the property arm of the nation’s biggest brokerage, fell to 93,800 yen, 6.2 percent lower than the IPO price of 100,000 yen. It was the biggest public offering of the year in Japan, raising 175 billion yen.
In another drag on shares, machinery orders for April fell 8.8 percent from the previous month, the Cabinet Office said today, more than the 8.1 percent estimate of 28 economists surveyed by Bloomberg. Machinery orders are an indicator of future capital spending.
“The corporate sector itself is still not confident, that’s very clear,” Kathy Matsui, chief Japan strategist at Goldman Sachs Group Inc., said in an interview today. “They’re not 100 percent clear that Abenomics is going to work. They’re still on the fence.”
The Topix Electric Power & Gas Index advanced 2.7 percent, offsetting yesterday’s 2.7 percent decline. Tokyo Electric Power jumped 7.1 percent to 572 yen. Kansai Electric Power Co. gained 5 percent to 1,181 yen after being raised to outperform from neutral at SMBC Nikko Securities.
Utilities gained even after a lower house committee of Japan’s parliament passed the first phase of a proposal that could open the power sector to competition.