Japan Stocks Fall, Led by Oil Explorers, Exporters as Yen Rises

  • Japan’s exports dropped for seventh straight month in April
  • U.S., Japan at odds over need to intervene in currency market

Is the Yen the Biggest Risk for U.S. Stocks?

Stocks fell in Tokyo, led by energy explorers as crude oil prices dropped and the yen strengthened, exacerbating a problem for exporters that has seen Japan’s overseas shipments decline for seven straight months.

The Topix index sank 0.4 percent to 1,338.68 at the close in Tokyo after earlier losing 1.8 percent. The Nikkei 225 Stock Average dropped 0.5 percent to 16,654.60. Volume of both measure was more than 20 percent below the 30-day average. The yen added 0.4 percent to 109.73 per dollar after two days of talks between Group of Seven finance chiefs were marked by discord between the U.S. and Japan over exchange-rate policies. Oil extended losses as traders started to focus on next week’s meeting of OPEC suppliers, with Iran claiming it won’t join any pact to freeze output.

“It comes down to the moves in the yen,” said Masaaki Yamaguchi, a Tokyo-based equity market strategist at Nomura Holdings Inc. “We saw the yen strengthening earlier in the morning, but that winding down accounts for stock moves as well. With earnings season over, we’re being moved by the currency.”

Toyota Motor Corp. fell 1 percent and Hino Motors Ltd. dropped 1.1 percent, leading exporters lower. Fancl Corp. fell 6.3 percent after releasing April data on Friday that showed sales growth slowing at the cosmetics maker.

Energy explorers were the biggest losers on the Topix, with Inpex Corp. falling 2.2 percent. Utilities also retreated, with Tokyo Gas Co. declining 2.4 percent. Shares focused on domestic consumption were also major decliners, with retailers and foodmakers among the biggest drags on the Topix.

Yen Clash

“It’s possible that the G-7 meeting made investors conclude Japan and the U.S. have failed to reach an agreement,” Kiyoshi Ishigane, chief strategist at Mitsubishi UFJ Kokusai Asset Management Co. in Tokyo, said by phone. “The yen is strengthening and Japan’s trade balance was bigger than expected.”

Japan’s exports fell for a seventh consecutive month in April as the yen strengthened. Overseas shipments declined 10.1 percent in April from a year earlier, the Ministry of Finance said on Monday. The median estimate of economists surveyed by Bloomberg was for a 9.9 percent drop. Imports slumped 23.3 percent, leaving a trade surplus of 823.5 billion yen ($7.5 billion).

The Japanese currency has gained 9 percent against the dollar this year, eroding the competitiveness of the nation’s products overseas and hurting the earnings of exporters. Concern about the impact of the yen was on show over the weekend as Finance Minister Taro Aso and his U.S. counterpart disagreed over the seriousness of recent moves in the foreign-exchange market.

Comments on the yen’s moves by Aso at Sendai on Friday and Saturday hinted at growing frustration about the impact on exporters, spurring speculation that the finance ministry may intervene. Aso raised the issue in a meeting with U.S. Treasury Secretary Jacob J. Lew. 

Lew repeated his view that the yen’s movement hasn’t been overly volatile. "It’s a pretty high bar to have disorderly conditions," Lew told reporters.

Futures on the S&P 500 Index added 0.1 percent. The underlying U.S. equity gauge rose 0.6 percent on Friday, rebounding from a seven-week low.

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