Japan's Topix Index Declines 5%

  • BOJ said to have made `rate check' calls to banks on yen
  • Global equities enter bear market as growth concerns deepen

Stocks plummeted in Tokyo, with the Topix index posting its biggest weekly loss since 2008, as global equities plunged into a bear market and the yen rose to its highest level in 15 months.

The Topix sank 5.4 percent to 1,196.28 at the close in Tokyo as trading resumed after a holiday, capping a 13 percent weekly decline. The Nikkei 225 Stock Average fell 4.8 percent to 14,952.61. The yen traded at 112.45 per dollar after touching 110.99 on Thursday, the strongest level since Oct. 31, 2014, when the Bank of Japan eased policy.

“We’ve entered a different phase in the market,” Juichi Wako, a senior strategist at Nomura Holdings Inc. in Tokyo, said by phone. “Dollar-yen movements are at the center as it is now the foreign-exchange market that is in the driver’s seat. We’re at the mercy of how currencies move.”

The currency’s surge is intensifying speculation the BOJ may intervene to arrest gains that threaten to undermine almost three years of monetary stimulus. Finance Minister Taro Aso said Friday the government is watching market movements and will take any action necessary. Following a regular meeting with Prime Minister Shinzo Abe, BOJ Governor Haruhiko Kuroda said he also would watch market moves closely.

The strengthening yen prompted the BOJ to make “rate check” calls to some banks, which sends a “strong warning shot” to markets that intervention may be on the way, Sassan Ghahramani, head of SGH Macro Advisors, said in a note Thursday. The BOJ hasn’t intervened in currency markets since 2011. Other investors are skeptical whether intervention is warranted now.

“For every action they take, they end up having to spend a bullet,” said Osamu Koizumi, Tokyo-based executive officer at Meiji Yasuda Asset Management Co., which oversees $7.9 billion. “Even if they held an extraordinary meeting to expand negative interest rates or asset buying, it doesn’t seem like it would have much effect. It’s best to just wait until things settle down overseas, especially the credit risk of financial companies.”

Japan GDP

Central banks from Japan to Europe signaling that additional easing is at the ready is failing to ease investor concern over global growth. Japan will report fourth-quarter gross domestic product figures on Feb. 15, with economists surveyed by Bloomberg expecting a 0.7 percent contraction on an annualized basis.

E-mini futures on the Standard & Poor’s 500 Index added 0.2 percent after the underlying equity gauge closed 1.2 percent lower on Thursday, paring earlier losses of as much as 2.3 percent.  The S&P 500 is 14 percent below its all-time high set in May, near its lowest level in two years.

Brokers Plummet

Financial companies and brokerages were among the biggest declines among the Topix’s 33 industry groups, all of which fell. Nomura Holdings Inc. plunged 9.2 percent to the lowest level since December 2012. Lender Orix Corp sank 12 percent, the most since May 2013.

Stocks sensitive to currency movements slumped. Subaru automaker Fuji Heavy Industries Ltd. plummeted 9 percent. Industrial-machinery maker Kubota Corp. closed down 7.1 percent. TDK Corp., which gets more than 90 percent of revenue abroadfrom smartphone components, dropped 6.2 percent.

SoftBank Group Corp. slid 9.5 percent after reporting net income fell 88 percent in the last quarter. Billionaire Chairman Masayoshi Son said he sees signs of a turnaround at its beleaguered U.S. unit Sprint Corp.

Oversold Territory

Investors said this week’s declines to below key levels have triggered margin calls among retail traders in Japan, who are being automatically forced to close souring bets. That’s adding to the selling pressure, according to Miki Securities Co.

“I think we’re now entering overshoot territory,” Jesper Koll, the Japan head of WisdomTree Investments Inc. in Tokyo, told Bloomberg TV. “The Japanese equity market is basically trading now at near-record-low valuation parameters even if you assume earnings are going to be declining over the next 12 months, so slowly but surely one should start to dip into the market.”

The Topix’s 14-day relative strength index fell to 26.49, below the level of 30 which some traders say indicates that shares will rise.

Banks fell again, with Sumitomo Mitsui Financial Group Inc. slipping 4.1 percent, while Mitsubishi UFJ Financial Group Inc. dropped 2.2 percent.

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