Japan Stocks Fall, Yen Rises After Greece Votes No to Austerity

Updated on

Japanese stocks fell as the yen strengthened after Greek voters rejected austerity demanded by creditors, endangering the nation’s future in the euro zone.

Tosoh Corp. plunged 11 percent as the chemicals maker led declines on the Nikkei 225 Stock Average after saying it plans to sell shares. Toshiba Corp. tumbled 2.7 percent after a report the electronics maker plans to cut past earnings by as much as 150 billion yen ($1.2 billion) following accounting problems. Maruha Nichiro Corp., a fishing company, led gains among just six stocks that rose on the Nikkei 225.

The Topix lost 1.9 percent to 1,620.36 at the close of trading in Tokyo, with all of its 33 industry groups dropping. The Nikkei 225 dropped 2.1 percent to 20,112.12. The yen, regarded as a haven, gained 0.7 percent to 135.47 per euro and added 0.2 percent against the dollar.

“There’s nothing we can do now except lower our risk and wait,” said Ayako Sera, a strategist at Sumitomo Mitsui Trust Bank Ltd., which manages the equivalent of $163 billion. “The euro was created based on this great dream of a unified Europe, and if they withdraw from the euro then the whole system is going to come into question.”

With all ballots counted, Greeks have voted 61 percent to back Prime Minister Alexis Tsipras in rejecting austerity measures required to win another bailout package, according to figures posted on the Interior Ministry’s website. The results mean Greece exiting the currency union is now the base-case scenario, JPMorgan Chase & Co. said. Polls last week had indicated the vote would be too close to call.

Greek Finance Minister Yanis Varoufakis announced he was quitting his post, saying his presence would hamper aid talks.

U.S. Futures

E-mini futures on the Standard & Poor’s 500 Index dropped 0.9 percent from Thursday. U.S. markets reopen Monday after a holiday on Friday.

The weekend Greek verdict turns the tables on German Chancellor Angela Merkel and her counterparts across Europe, who must decide if a financial rescue of the region’s most indebted country is still possible. It significantly raises the chances of a Greek exit from the single currency, as the country’s banks run out of cash and its economy staggers toward all-out collapse.

Merkel and French President Francois Hollande called for a summit of euro-area leaders to be held July 8. European Union President Donald Tusk confirmed a meeting will be held Tuesday in a Twitter post.

“The Greece ‘no’ vote is a surprise,” Shoji Hirakawa, chief equity strategist at Okasan Securities Co. in Tokyo said by phone. “But the key is that the direction is going toward more talks after this.”

Precedent Risk

While Greece accounts for less than 2 percent of the euro zone’s output, an exit would set a precedent for other nations that membership is reversible. The country’s immediate fate lies with the European Central Bank, which may take its cues from European Union leaders as to whether it can keep emergency loans flowing to Greece without the prospect of a bailout package.

The Greek government’s decision to call a snap plebiscite on creditors’ demands spurred a deepening in the nation’s financial crisis, with capital controls imposed and the country unable to make a scheduled payment to the International Monetary Fund last week.

What Next

“There is now going to be a period of market uncertainty as we transition through the what-next phase,” Chris Green, Auckland-based director of economics and strategy at First NZ Capital Ltd, said by phone. “There’s a flight to safety. There’ll be a couple of days of head scratching and trying to assess what the next political moves will be.”

In China, the government suspended initial public offerings and brokerages pledged to buy shares in weekend measures aimed at halting the steepest plunge in local equities since 1992.

Tosoh slumped 11 percent, the most on the Nikkei 225 and its biggest decline since March 2011, after saying it plans to raise as much as 35.2 billion yen in a share sale. The proceeds will be spent on capital expenditure, the petrochemical producer said.

Toshiba lost 2.7 percent. Writedowns on past earnings from accounting irregularities will be as much as 150 billion yen, the Nikkei newspaper reported, without citing anyone.

Maruha Nichiro added 0.9 percent, leading advances by six stocks on the Nikkei 225. Nomura Holdings Inc., Japan’s biggest brokerage, and Keio Corp., a train operator, climbed 0.3 percent.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE