Japanese Stocks Slump as Yen Gains Following U.S. Jobs Report

  • Equities pare losses in afternoon trading before Yellen speech
  • Insurers tumble on concerns U.S. investment income to diminish

Japan’s Topix index fell after the weakest U.S. employment report in almost six years sent the dollar plunging against the yen, clouding the outlook for exporters. Equities pared losses in afternoon trading.

Investors in Japan were dealt another blow after shares slumped last week on disappointment Prime Minister Shinzo Abe didn’t detail a stimulus package when he announced a delay to the sales-tax increase. The worse-than-forecast jobs report calls into question the Federal Reserve’s case for raising interest rates and the trajectory for the dollar-yen rate. The Topix had gained in May and the yen weakened amid growing bets the U.S. economy is strong enough to handle a boost to borrowing costs.

The Topix index dropped 0.4 percent to 1,332.43 at the close in Tokyo, while the Nikkei 225 Stock Average lost 0.4 percent to 16,580.03. The Topix tumbled as much as 1.9 percent in morning trading, after the yen surged 2.2 percent on Friday as data showed U.S. employers added the fewest number of workers since 2010 in May. Stocks trimmed losses in the afternoon as the yen weakened 0.4 percent to 106.99 per dollar and investors awaited a speech by Fed Chair Janet Yellen.

“The market had been taking an optimistic view that even if we see a U.S. rate hike in the coming few weeks, the economy was brisk enough to withstand it. But now we see that there’s a gap between the actual economy and what the market was thinking,” said Yoshinori Ogawa, a market strategist at Okasan Securities Co. in Tokyo. Investors “want to confirm if Yellen’s tone has changed following the latest payrolls report.”

The Topix has been battered this year, with the gauge down 14 percent as a global equity rout that began at the start of 2016 sent the yen higher, while the Bank of Japan’s efforts to boost stimulus by implementing negative rates hurt bank shares. Abe last week said the country will delay a planned sales-tax boost, which had been scheduled for next April, on concern consumption isn’t strong enough to handle a higher levy.

Attention will turn to policy meetings of both the BOJ and the Fed next week. In Japan, investors will watch for signs on whether the central bank will add to stimulus to reach its 2 percent inflation goal. In the U.S., the addition of 38,000 workers last month pared back expectations the Fed will raise rates soon. Traders are now pricing in a 27 percent chance of a boost in U.S. rates by July, down from 55 percent before the report.

Investors are waiting for a speech on Monday by Yellen, who may give some clues to her thinking at her last public speaking event ahead of the monetary policy meeting on June 15.

Toyota, Nissan

Exporters fell, with Mazda Motor Corp. and Nissan Motor Co. dropping at least 1.3 percent. Honda Motor Co., which gets 56 percent of its revenue from North America, slid 1.9 percent.

Panasonic Corp. slid 2 percent after the Nikkei newspaper reported the Japanese electronic maker’s customer, Tesla Motor Inc., received a shipment of battery cells from rival Samsung SDI Co. Panasonic had been an almost exclusive supplier to Tesla for battery cells, according to the Nikkei.

Insurers were among the biggest losers in Tokyo on concerns their investment income may suffer after yields on U.S. government debt fell. Dai-Ichi Life Insurance Co. sank 3.6 percent, while Tokio Marine Holdings Inc. slid 2.9 percent.

Futures on the S&P 500 Index were little changed after the underlying gauge lost 0.3 percent on Friday, slipping from a seven-month high as a gauge of U.S. non-manufacturing activity in May declined to its weakest since February 2014.

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