Japanese Shares Slump, Yen Gains as Investors Keep Eye on BOJ

  • Volume on the Topix was 20 percent lower than the average
  • Yen could rise further without a U.S. rate hike: KGI’s Teo

Japanese shares dipped to an almost two-week low amid a lull in activity, extending declines in afternoon trading after the yen advanced. Real estate companies and insurers led drops.

The Topix index fell 1.4 percent to 1,298.47 at the trading close in Tokyo, with volumes 20 percent below the 30-day average. The Nikkei 225 Stock Average sank 1.6 percent, while the yen gained 1 percent to 100.24 a dollar. Investors have been keeping a close eye on where Tokyo shares close in the morning session to gauge whether the Bank of Japan will step in to buy exchange-traded funds in the afternoon. Typically the central bank buys the securities when the Topix closes lower at the trading break.

“With few investors trading right now, small sell orders can make the whole market crumble,” said Masayuki Otani, chief market strategist at Securities Japan Inc. in Tokyo. “There were hopes that the BOJ would buy ETFs today, but it doesn’t look like that’s happening. Also the yen gained during the trading break. Equity investors are cutting their losses.”

The Topix has fallen 0.7 percent since July 28, the day before the BOJ announced it would almost double its purchases of ETFs to 6 trillion yen ($59.7 billion) a year. The gauge is down 16 percent this year, the worst performing developed market after Italy.

The Topix traded in a tight range this morning prior to the yen’s spike, before sliding lower to close at the day’s lows. Oil and coal producers was the only sector to rise among the Topix’s 33 industry groups, with crude prices holding above $45 a barrel.

  • Cyberdyne Inc., a Japanese maker of robot exoskeletons for patients with spinal difficulties, tumbled 6.8 percent after short-seller Citron Research said the company’s stock is poised to plunge. The report is malicious and contains factual inaccuracies, Cyberdyne Chief Financial Officer Shinji Uga said.
  • Pachinko-machine maker Sankyo Co. slid 3.4 percent. after SMBC Nikko Securities Inc. cut its target price on the stock.
  • Sony Corp. lost 0.2 percent after rising by as much as 1.4 percent. Fitch Ratings Ltd. revised its outlook on the consumer electronics maker to positive, citing higher margins in its non-financial businesses and the management’s commitment to improve profitability.

Futures on the S&P 500 Index slipped 0.1 percent. The underlying measure gained 0.3 percent on Monday. Speculation the Federal Reserve will refrain from raising rates anytime soon increased after data on U.S. retail sales last week was less than analyst estimates, while a report Monday showed manufacturing activity in the New York region unexpectedly contracted this month.

“The yen is being driven by the dollar’s weakness, spurred on by increasing expectations the Federal Reserve won’t raise rates this year,” Nicholas Teo, a strategist at KGI Fraser Securities in Singapore, said by phone. “This complicates things for Japanese policy makers seeking to stimulate Japan’s economy. If the Fed doesn’t move this year, there’s a risk of steeper moves next year. That’s very dangerous.”

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