Japanese Stocks Decline for a Second Week as Yen Strengthens

  • Dollar falls as investors recalculate Fed interest-rate path
  • Energy explorers advance as oil climbs above $40 a barrel

Japanese Stocks Bear the Weight of a Falling Yen

Japanese stocks fell for a fourth day after the dollar continued to tumble against the yen, weighing on the earnings outlook for exporters. Energy explorers gained on higher crude prices.

The Topix index declined 1 percent to 1,345.05 at the close in Tokyo, capping a second week of losses after jumping 15 percent over the preceding three weeks. The Nikkei 225 Stock Average slid 1.3 percent to 16,724.81. The yen traded at 111.43 against the dollar after touching 110.67 on Thursday. The dollar reached its largest two-day decline since 2009 as investors recalculated the Federal Reserve’s interest-rate tightening path after the central bank cut forecasts for economic growth and inflation.

"There’s concern for exporters," said Nobuyuki Fujimoto, a senior market analyst at SBI Securities Co. "If the yen’s trading around 114 to the dollar, then companies will expect profits next fiscal year, but when it’s 110, most exporters will post losses."

Carmakers were the heaviest drag on the Topix, with Toyota Motor Corp. falling 2.3 percent. Juki Corp. jumped 9.5 percent after the sewing-machine manufacturer announced it will buy back shares. CKD Corp. added 4.1 percent after Iwai Cosmo Securities Co. raised its rating on the pneumatic-equipment maker to outperform. Oil explorers were the biggest gainers on the Topix as Inpex Corp. rose 1.3 percent.

U.S. Futures

Futures on the Standard & Poor’s 500 Index were little changed. The underlying U.S. equity gauge rose near its break-even level for the year on Thursday, while the Dow Jones Industrial Average erased its 2016 losses. The weaker dollar spurred a rally in commodity producers and industrial shares that spread to the broader U.S. stock market.

U.S. crude oil prices held above $40 a barrel, close to its highest point this year.

This week’s Fed meeting prompted investors to question whether the dollar’s rally has run out of steam. Until this year, the U.S. currency had outperformed most developed and emerging-market currencies as the promise of superior economic growth and rising interest rates contrasted with sluggish economic activities elsewhere. Investors are now questioning whether the U.S. can escape the storm of a global slowdown unscathed and continue with a second, or even more, hikes in 2016.

"The Federal Reserve’s decision this time points to a later rate-hike and is positive for global liquidity, but the negative effects from the strength in the yen is more in focus for Japanese companies," said Tatsushi Maeno, head of Japanese equities at Pinebridge Investments Japan Co. in Tokyo

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