Japan's Topix Index Extends Decline to 5%

  • MUFG leads banks lower as benchmark JGB yields breach zero
  • Nomura shares decline after Jefferies downgrades stock

It’s been a rough couple of weeks for Japanese bank investors.

The shares were the biggest losers after the Bank of Japan decided to introduce negative interest rates late last month, and now they’re being clobbered by a global selloff of financial stocks stemming from concerns about the health of their European competitors.

Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc., Japan’s biggest lenders by market value, fell more than 8 percent Tuesday in Tokyo. The companies are now trading at less than half the book value of their assets.

Japan’s benchmark 10-year government bond yields dropped below zero for the first time, underscoring the challenge for banks to make money from lending in the world’s third-largest economy. European and U.S. financial stocks plunged on Monday as Deutsche Bank AG became the largest lender in at least four years to feel compelled to reassure investors and employees that it has enough cash to pay its debts.

"Japan’s market is getting hit across the board amid the global selloff, and bank shares are being hurt by concerns about the BOJ’s adoption of negative rates," said Takashi Miura, a Tokyo-based analyst at Credit Suisse Group AG. "Traders are jumpy about the possibility of more easing steps by the BOJ, so it’s hard to buy shares."

Nomura Tumbles

Banks, brokerages and other financial companies were the worst-performing industry groups on Japan’s benchmark Topix index, which slumped 5.3 percent as of 12:45 p.m. local time. Nomura Holdings Inc.plunged 11 percent, extending this month’s decline to 23 percent, a day after Jefferies Group LLC downgraded the nation’s largest securities firm on concerns that its overseas operations are losing money.

Financial Services Minister Taro Aso said the government will monitor the impact of negative rates on financial institutions. The Topix Banks Index has dropped about 21 percent since BOJ Governor Haruhiko Kuroda’s board on Jan. 29 said it will start charging lenders 0.1 percent interest for some of their deposits held at the institution.

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