Japan's Topix Erases Gain as BOJ Refrains From Adding to Easing

  • Equity measure climbed as much as 1.9% before BOJ decision
  • KDDI posts 14% two-day drop as mobile phone carriers slump

Japan’s Topix index erased gains after the nation’s central bank decided against adding to record monetary easing.

Mobile phone carriers and construction stocks were the heaviest drags on the Topix. Toshiba Corp. slid 1.8 percent after posting a quarterly net loss and as the Tokyo bourse put the company on a monitoring list following an accounting scandal. Nisshin Seifun Group Inc. rose the most on the Nikkei 225 Stock Average after SMBC Nikko Securities Inc. said the flour producer will beat its operating profit forecast.

The Topix was little changed at 1,462.24 at the close of trading in Tokyo, wiping out gains of as much 1.9 percent. Volume was 19 percent below the 30-day average. The Nikkei 225 increased 0.3 percent to 18,026.48, paring gains as the yen reversed losses and rose 0.4 percent to 119.81 per dollar.

“Like most investors, the BOJ is waiting for the Fed,” said David Welch, head of equity sales trading at Reorient Group in Hong Kong. “It was a low-probability event that the BOJ would do anything. However, the chance of a move in October is rising.”

BOJ Projections

Thirty-three of 35 economists in a Bloomberg survey before the decision projected the BOJ would maintain the current pace of monetary stimulus, while two forecast an expansion. More than a third saw the central bank adding to current easing by the end of next month. Inflation in July slowed to zero for the third time this year, increasing pressure on Governor Haruhiko Kuroda. He said in August that the BOJ could meet its 2 percent price target with the current level of stimulus.

Short-selling of shares on the Tokyo Stock Exchange surged to 42.4 percent of total trading value on Monday, the highest since bourse data became available in 2008. Investors were covering their short positions on Tuesday morning ahead of the BOJ outcome, Welch said.

China, Fed

China’s stocks fell for a second day, with the Shanghai Composite Index retreating 4 percent amid concern investors will continue to pull funds from the nation’s equities as data show a deepening economic slowdown.

E-mini futures on the Standard & Poor’s 500 Index were little changed. The underlying equity measure slid 0.4 percent in New York on Monday, with Yahoo Inc. and Alibaba Group Holding Ltd. dropping at least 3.1 percent.

With two days to go until the Fed’s statement, interest-rate futures put the odds of a hike this week at 28 percent, down from more than 50 percent before China roiled markets with its surprise currency devaluation.

Overall Picture

“The overall picture of waiting for the Fed hasn’t changed, nor has the fact that Japanese stocks will be influenced by moves in Chinese shares,” said Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co. in Tokyo.

Mobile carriers NTT Docomo Inc., KDDI Corp. and SoftBank Group Corp. sank for a second day after Prime Minister Shinzo Abe said call rates are too high. Internal Affairs and Communications Minister Sanae Takaichi said the government would form a panel to cut mobile rates and achieve results within this year, Kyodo news wire reported.

Nisshin Seifun Group jumped 4.7 percent. The flour producer will likely report 10 billion yen ($83.5 million) in operating profit in the first half of this fiscal year, beating company guidance for 7.8 billion yen, SMBC Nikko analysts led by Nahoko Kataoka wrote in a report Monday.

Toshiba slumped 1.8 percent after its shares were put on alert by the Tokyo Stock Exchange starting Tuesday because trust in the company was damaged by the accounting irregularities. Toshiba’s net loss was 12.3 billion yen for the three months ended June, it said Monday.

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