Japan Stocks Fall as Yen Near 18-Month High Weighs on Exporters

  • Topix index declines to lowest closing level since Feb. 12
  • Regional banks decline after Mizuho warns on index exclusion

Japan’s Topix index fell for the fifth time in six days as the yen rallied to near its highest level against the dollar in 18 months, damping the earnings outlook for exporters, while cheaper oil dragged energy shares lower.

The Topix dropped 2.6 percent to 1,268.37 in Tokyo, its lowest closing level since Feb. 12. That day marked the index’s weakest level since October 2014, when the Bank of Japan began a second round of stimulus. The yen strengthened to 110.73 per dollar, trading below the 111 level for the first time in three weeks. Oil extended losses after dropping to a one-month low amid doubts about the prospects of a proposed deal to freeze supply.

“The risk of a strong yen is still there and coupled with overseas factors like falling oil, it’s quite hard to become positive,” said Norihiro Fujito, a strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “We’re likely to keep trading at these depressed levels.”

Japanese equities failed to join a global rally in March that last week pushed U.S. shares to their highest level this year. The yen’s strength has persisted as robust economic data out of America has been outweighed by dovish comments from some Federal Reserve officials, including Chair Janet Yellen. The Nikkei 225 Stock Average declined 2.4 percent to 15,732.82 on Tuesday, falling for a sixth day.

Exporters dropped as the yen strengthened. Suzuki Motor Corp., which gets two-thirds of revenue overseas, fell 4.2 percent, while Mazda Motor Corp. lost 3.7 percent.

Banks, Oil

Banks led losses among the 33 Topix industry groups, all of which fell. Mitsubishi UFJ Financial Group Inc. slid 4.3 percent, the most in almost two months. Regional lenders dropped, including Hokuhoku Financial Group Inc., which sank 6.9 percent after Mizuho Financial Group Inc. said many could be excluded from an MSCI benchmark index.

Oil fell for a third day after Saudi Arabia’s deputy crown prince said last week that his country will freeze output only if Iran follows suit. Energy shares were the second-biggest decliners on the Topix, with Inpex Corp. sinking 4.2 percent while Japan Petroleum Exploration Co. lost 3.7 percent.

Takata Corp. slid 6.8 percent to a record low. Its shares have lost more than a quarter of their value since Bloomberg News reported on March 30 that the company estimates a comprehensive recall would cost it 2.7 trillion yen ($24 billion), according to a person familiar with the matter.

Futures on the Standard & Poor’s 500 Index declined 0.4 percent after the underlying gauge retreated 0.3 percent on Monday from its highest level this year. Trading volumes on U.S. markets were 25 percent below the 2016 average as investors looked for fresh reasons to continue a rally.

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