Japan Shares Drop, Led by Exporters, as Yen Gains on U.S. Report

Asian Equities: Is Now the Time to Jump In?
  • Investors pare bets for Fed rate hike on poor services data
  • Nippon Soda slumps, Rakuten surges on Nikkei 225 reshuffle

Japanese shares dropped for the first time in six days as the yen strengthened after the release of weak U.S. data, hurting the outlook for exporters’ earnings.

The Topix index fell 0.2 percent at the close in Tokyo, paring earlier losses of as much as 1 percent, with carmakers and electronic-appliance manufacturers among the industry groups contributing the most to the decline. The yen strengthened 1.4 percent against the dollar on Tuesday after the Institute for Supply Management’s services gauge unexpectedly dropped to a six-year low and expectations the Japanese central bank will take more easing action this month receded. Cracks are showing in an otherwise resilient U.S. economy, prompting traders to pare back bets on a September increase in borrowing costs.

SecurityPercent ChangePrice
Nikkei 225-0.4%17,012.44

“We can’t really ignore the fact that the ISM numbers were fairly poor,” said Kiyoshi Ishigane, chief strategist at Mitsubishi UFJ Kokusai Asset Management Co. in Tokyo. “Simply put, a rise in borrowing costs this month will be difficult with numbers like these. In Japan, the effects of the stronger yen mean that stocks can’t avoid falling.”

As of Tuesday, traders were pricing in a 24 percent chance the U.S. central bank will raise borrowing costs this month, down from 32 percent the day before.

Meanwhile, the Bank of Japan’s board members are struggling to reach a consensus on a comprehensive policy review to be released at the central bank’s meeting on Sept. 20-21, the Sankei newspaper reported, without saying who provided the information. A former BOJ executive director said that the central bank will leave its stimulus program unchanged
this month, given little deterioration in economic fundamentals and growing caution about the risks of expansion.

The majority of the Topix’s 33 industry groups declined. Toyota Motor Corp. sank 0.8 percent, while Murata Manufacturing Co. lost 0.9 percent.

  • Nippon Soda Co. posted the biggest drop on the Nikkei 225 Stock Average, tumbling 11 percent, after Nikkei Inc. announced the chemical maker will be removed from the gauge. Online marketplace operator Rakuten Inc., which will replace Nippon Soda, surged 7.2 percent.
  • Hamamatsu Photonics KK fell 5.6 percent after SMBC Nikko Securities Inc. cut its share price target for the maker of high-precision sensors, citing tapering demand and over-valued share prices.
  • Kakaku.com plunged 4.9 percent after Fidelity cut its holding of the website operator to 4.88 percent from 6.22 percent. Gurunavi Inc., which operates a rival restaurant ranking site to Kakaku.com’s Tabelog, rose 5.3 percent.

The Topix reached a year-to-date high in dollar terms, while trading volume was 4.6 percent above the 30-day average.

Futures on the S&P 500 Index were little changed. The underlying equity gauge rose 0.3 percent on Tuesday while the Nasdaq Composite Index climbed to a record high.

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