Japan Stocks Reverse Gains as Yen Rises on Fed, Toshiba Plunges

Yen-Dollar and the Fed's Impact on the Bank of Japan
  • Energy explorers advance after crude climbs most in 3 months
  • Toshiba said to be under U.S. investigation over accounting

Japanese stocks fell, reversing earlier gains, as the yen strengthened after the Federal Reserve scaled back forecasts for interest-rate increases this year. Toshiba Corp tumbled as Bloomberg News revealed it’s under investigation in the U.S.

The Topix index slipped 0.1 percent to 1,358.87 at the close in Tokyo, reversing a gain of as much as 1.5 percent as it capped a third day of declines. The Nikkei 225 Stock Average lost 0.2 percent to 16,936.38. The yen traded at 112.16 against the dollar, strengthening for a third day.

“The fall seems to be more of a speculative move than anything else,” Takuya Takahashi, a Tokyo-based senior strategist at Daiwa Securities Group Inc., said by phone. “The yen is strengthening after the Fed’s meeting yesterday, but it’s difficult to see if that was truly a surprise.”

Toshiba plunged 8 percent on the news it’s being probed over allegations that it hid $1.3 billion in losses at its nuclear-power operations. The Justice Department and the Securities and Exchange Commission are looking into whether fraud was committed, according to two people familiar with the matter, who asked not to be named because the investigations aren’t public. Japan’s securities regulator has already found Toshiba falsified financial statements and documents involving its issuance of corporate bonds.

Record Fine

Until now, the investigation into Toshiba’s accounting practices had been limited to its home country, where regulators fined the company $62.1 million -- the largest penalty ever imposed -- and fined its former auditor, Ernst & Young ShinNihon LLC, $17.4 million and barred it from accepting new business for three months.

Keikyu Corp. fell 2.8 percent after the rail operator revised down its full-year operating profit forecast.

Oil explorers rose the most on the Topix, with Inpex Corp. climbing 2.4 percent, as U.S. crude extended its advance after rising 5.8 percent on Wednesday.

Okamura Corp. added 2.5 percent after the office-furniture manufacturer raised its full-year operating profit forecast. Ryobi Ltd. surged 12 percent after the auto-parts maker raised its full-year operating profit forecast and dividend target.

Fewer Increases

The Federal Open Market Committee kept the target range for the benchmark federal funds rate between 0.25 percent and 0.5 percent on Wednesday following a two-day meeting in Washington. The median of policy makers’ updated quarterly projections saw the rate at 0.875 percent at the end of 2016, implying two quarter-point increases this year, down from four forecast in December.

Futures on the Standard & Poor’s 500 Index added 0.2 percent. The underlying equity gauge advanced 0.6 percent on Wednesday, closing at its highest level this year.

Stocks rose Thursday across the rest of Asia, with the MSCI Asia Pacific Index up 1.7 percent, its first gain in three days.

“The Federal Reserve has once again come to the market’s rescue,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney. “The Fed offered to meet the market in the middle, with its dot plot of expectations adjusted to reflect only two rate rises this year, down from four previously.”  

The third major central-bank event in a week, the Fed’s March meeting came in the wake of major stimulus announcements from policy makers in Europe and Japan that received a mixed reception in markets worldwide. European shares slumped on the day the European Central Bank announced additional easing, while a decline in bank shares weighed on equities in Tokyo after the Bank of Japan introduced negative interest rates in January.

Big Picture

"The big picture situation where the effects of monetary policy have been weakening hasn’t changed," said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd. But "the Federal Reserve is being smart. The U.S. is managing to weaken its currency by delaying the hikes within the rate-hike cycle. On the other hand, the BOJ and the ECB have managed to strengthen their currencies with additional easing. In the end, the market’s looking at how much scope for more easing the central banks have."

The yen has strengthened more than 6 percent against the dollar this year. The Topix posted its first weekly loss in four weeks last week, after jumping 15 percent over the preceding three weeks.

“The Fed has clearly been rattled by the nasty selloff seen at the start of 2016,” Angus Nicholson, a market analyst in Melbourne at IG Ltd., said in an e-mail to clients. “This was far more dovish than markets had expected.”

Japan’s exports fell for a fifth consecutive month in February, underscoring continued weakness in an economy that contracted in the final months of 2015. Shipments declined 4 percent from a year earlier, data showed on Thursday.

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