Japanese Stocks Slide as Yen Advances Ahead of BOJ, Fed Meetings

  • Volume subdued as investors await central bank, Brexit vote
  • Yen gains for seventh day out of eight, dragging on exporters

Stocks in Tokyo fell, with the Topix index dropping the most in a week, as the yen’s strength weighed on exporters while investors awaited central bank decisions from Japan and the U.S.

The Topix index lost 1 percent to 1,337.41 at the close, the most since June 2, with volume 18 percent below the 30-day average. Federal Reserve Chair Janet Yellen indicated on Monday that she’s fairly sure the U.S. economy will improve enough to warrant another interest-rate boost, but was silent on when an increase would be needed. Bank of Japan Governor Haruhiko Kuroda will make a decision on stimulus on June 16, a day after the Fed.

“Given everything Yellen has said so far, we’re unlikely to see her move this month,” said Akihiro Tsunoda, a senior investment manager at Sompo Japan Nipponkoa Asset Management Co. in Tokyo. “And as for Kuroda, he likes to surprise people, but that raises risks and volatility.”

The Nikkei 225 Stock Average slid 1 percent to 16,668.41. The yen climbed 0.2 percent to 106.74 per dollar after strengthening 0.4 percent on Wednesday. The Japanese currency has risen about 13 percent this year against the greenback.

Trading volumes in Japanese shares have slumped since the start of May. The 20-day moving average of volume on the Topix fell to about 1.9 billion shares on Thursday, the lowest since May 2014. As well as the Fed and BOJ meetings, the U.K. decision on whether to remain in the European Union on June 23 is also weighing on investors’ minds.

“With central bank meetings and a decision on Brexit looming, there’s a lot of uncertainty,” said Mitsushige Akino, a Tokyo-based executive officer at Ichiyoshi Asset Management Co.

The yen strengthened for the seventh time in eight days, dragging exporters Nissan Motor Co. and Subaru manufacturer Fuji Heavy Industries Ltd. lower by at least 2.4 percent. Heavy-machinery maker Kubota Corp., which gets almost a third of its revenue from north America, dropped 3.7 percent.

Financial companies led losses, with Mitsubishi UFJ Financial Group Inc. dropping 3.3 percent, while Dai-Ichi Life Insurance Co. declined 2.2 percent, as the slide in global yields clouded the outlook for investment income. The European Central Bank began buying corporate bonds on Wednesday, helping drive average yields on investment-grade company debt below 1 percent.

Musk Tweets

Panasonic Corp. dropped 2.9 percent after Elon Musk indicated rival Samsung SDI Co. may supply batteries to Tesla Motors Inc. in the future. Earlier, Musk tweeted that Panasonic would be the exclusive supplier of batteries for the upcoming Model 3 small car, sending the Japanese company’s shares 3.7 percent higher on Wednesday.

Futures on the S&P 500 Index slipped 0.1 percent after the underlying gauge advanced 0.3 percent on Wednesday to close within 1 percent of an all-time high.

Energy stocks gained the most among the 33 Topix industry groups, as oil explorer Inpex Corp. climbed 2.6 percent while crude refiner Idemitsu Kosan Co. rose 3.3 percent. Crude prices rose above $51 a barrel to near a 10-month high after government data showed U.S. inventories fell for a third week.

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