Japanese Shares Fall as Optimism for Helicopter Money Declines

Is So-Called Helicopter Money a BOJ Last Resort?
  • Exporters slide after yen rises most in about one month
  • Nintendo, McDonald’s Japan rise on game’s launch in country

Japanese shares fell, with the Topix index slumping from a six-week high, after the yen rose the most in nearly a month amid waning optimism that so-called helicopter money will be adopted as a stimulus measure.

The Topix declined 0.9 percent to 1,327.51 at the close in Tokyo after the measure closed at its highest level since June 8 on Thursday. The Nikkei 225 Stock Average slid 1.1 percent. The yen traded at 105.88 per dollar on Friday after rising 1 percent on Thursday.

QuickTake Helicopter Money

The yen climbed after BBC Radio 4 aired an interview with Bank of Japan Governor Haruhiko Kuroda, in which the central bank head said that at this stage there is “no need and no possibility for helicopter money.” The interview was conducted on June 17. People familiar with the discussions at the central bank have indicated that an increasing number of officials at the BOJ are concerned about the sustainability of the current framework for massive monetary stimulus.

“The market had risen on hopes for helicopter money,” said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd. “Yesterday’s report came at just the right time for investors wanting to close their positions and take profits.”

Growing Speculation

Speculation the BOJ could adopt helicopter money grew after Etsuro Honda, an adviser to Prime Minister Shinzo Abe, said former U.S. Federal Reserve Chairman Ben S. Bernanke had floated the idea of perpetual bonds during discussions with the Japanese aide in Washington in April. Honda was speaking after Bernanke met with Abe and key officials in Tokyo last week. The Topix has rallied after Abe’s win in the upper house elections on July 9 raised optimism the government will enact bolder stimulus measures.

The Nikkei newspaper reported Friday that the government’s fiscal stimulus package could be as large as 30 trillion yen ($284 billion). Finance Ministry officials told Abe on July 11 that fiscal stimulus can be increased to the range of 20 trillion to 30 trillion yen if it includes government guarantees and other off-budget measures, the Nikkei newspaper reported.

“Views on monetary policy are whipsawing,” said Juichi Wako, a senior strategist at Nomura Holdings Inc. in Tokyo. “The yen is strong, U.S. shares have fallen and exporters are likely to take a breather.”

Carmakers and electric-appliance manufacturers were the biggest drags on the Topix, with all but four of the 33 industry groups on the measure falling.

  • Nintendo Co. advanced 0.8 percent and McDonald’s Holdings Co. (Japan) rose 4.2 percent after the Pokemon Go game became available in Japan on Friday.
  • Nitto Denko Corp. sank 1.7 percent after the Nikkei newspaper reported Japanese component makers may be hurt by iPhone production cutbacks. Smartphone parts makers Alps Electric Co. sank 4.8 percent and Taiyo Yuden Co. declined 3.5 percent.
  • Chugai Pharmaceutical Co. jumped 4.8 percent, the most on the Nikkei 225, after posting a 4.7 percent gain in profit for the six months ended June 30. 
  • Sumco Corp. slumped 4.5 percent after UBS Group AG resumed coverage on the stock with a sell rating.

Futures on the S&P 500 Index were little changed. The underlying measure declined 0.4 percent on Thursday, retreating from record levels, as disappointing earnings results raised concern over the strength of the economy.

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