Japan’s Topix Falls After Seesawing on Fed Rate-Hike Outlook

  • Fed minutes signal June rate increase if economy allows
  • Energy and commodity shares retreat on a stronger dollar

Japan’s Topix index closed lower as investors weighed minutes from the Federal Reserve’s latest meeting, in which policy makers signaled a willingness to raise U.S. interest rates in June. Declines in commodity-related and energy shares offset gains at financial companies.

The Topix slipped 0.1 percent to 1,336.56 at the close in Tokyo after swinging between gains of 1.1 percent gain and losses of 0.5 percent. The Nikkei 225 Stock Average closed little changed at 16,646.66. The yen traded at 110.23 per dollar after falling 1 percent on Wednesday. Minutes from the Fed’s April meeting showed most officials said a rate increase would be appropriate in June if the economy continued to improve.

“Fed policy makers showed an unexpectedly strong desire to increase interest rates in June. But who knows if they’ll actually do it or not,” Mitsushige Akino, Tokyo-based executive officer at Ichiyoshi Asset Management Co., said by phone. “The dollar is back to the 110 yen level with the yen, so that’s a plus. But markets aren’t likely to rise too much. We’re not in a risk-on atmosphere where the yen could keep getting weaker and weaker.”

Futures markets show traders are now pricing in a 32 percent chance of a hike next month, up from 12 percent prior to the release. While strong data on inflation and retail sales since the Fed’s last meeting bolstered the outlook for a rate increase, the Citi Economic Surprise Index, which measures the strength of data relative to analysts expectations, has shown little improvement in May.

Futures on the S&P 500 Index fell 0.1 percent after the underlying U.S. equity gauge closed little changed on Wednesday. Banks rallied on prospects for a revenue boost from higher interest rates, while poor earnings results at retailers dragged consumer shares lower.

Insurers led gains in Tokyo on the outlook for higher investment returns from an increase in interest rates, sending Dai-ichi Life Insurance Co. 2.8 percent higher. The group also got a boost from a Nikkei article that said non-life insurance companies may see record profits in the current fiscal year.

Suzuki Motor Corp. jumped 3.5 percent, paring Wednesday’s 9.4 percent drop. The company elaborated after markets closed Wednesday that its improper testing methods would not result in changes to the fuel-efficiency ratings of its vehicles.

Strong Dollar

Energy shares led losses in Tokyo as the threat of a stronger dollar sent oil futures tumbling. Inpex Corp., Japan’s largest oil and gas explorer, fell 5.9 percent, while JX Holdings Inc. dropped 2.8 percent.

Iron and steel producers tumbled as the dollar weighed on commodity prices. JFE Holdings Inc. lost 2.5 percent, while Nippon Steel & Sumitomo Metal Corp. dropped 3.1 percent.

Online retailer Start Today Co. slumped 7.4 percent after its founder and largest shareholder announced he sold part of his stake at an 8 percent discount to Wednesday’s closing price. The founder recently bought $98 million worth of art at a New York auction.

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