Japan Shares Drop as Yen Gains, Fishing and Machine Stocks Slide

  • Yen’s 18 percent gain this year raises concern over exporters
  • Topix index still 3.2 percent below its pre-Brexit levels

Japanese shares dropped on thin volume, with the benchmark equity gauge falling for the first time in three days, as gains in the yen hurt exporters while agricultural stocks and machinery makers led declines.

The Topix index fell 0.4 percent to 1,256.64 at the close in Tokyo, with volume 20 percent below the 30-day average. The measure added 0.6 percent on Monday, extending a 4.2 percent jump last week. The Nikkei 225 Stock Average slid 0.7 percent, while the yen strengthened 0.6 percent to 101.98 per dollar. 

Stocks have “made good gains over the last few days,” said Andrew Sullivan, managing director for sales trading at Haitong International Securities Group in Hong Kong. “A lot of people are prepared to lock those in.”

Investors are keeping a close eye on the Japanese currency as the yen’s 18 percent surge against the dollar this year raises concerns over corporate profits. The yen extended its advance following the U.K.’s decision to exit the European Union on June 23, turning the outlook for a gain in annual profit to the first decline in four years.

Downward Revisions

“The mid-102-per-dollar range for the yen is higher than what companies had previously been anticipating,” said Toshihiko Matsuno, a senior strategist with SMBC Friend Securities Co. “This could result in a downward revision to earnings.”

U.S. markets were closed Monday for the Independence Day holiday. Futures on the S&P 500 Index slid 0.2 percent on Tuesday from Friday’s close. The underlying U.S. equity gauge advanced 3.2 percent last week. The MSCI All Country World Index fell on Tuesday, led by financial stocks.

Even after the recent rally, the Topix is still 3.2 percent away from its pre-referendum level. About 10 shares fell for every seven that rose the Topix on Tuesday. Electric-appliance makers and banks were the biggest contributors to the day’s decline, followed by machinery manufacturers and telecommunication companies.

  • Japan Display Inc., a supplier of smartphone screens, surged 11 percent. Hedge fund Effissimo Capital Management Pte disclosed Monday it holds a 5.4 percent stake in the panel-maker. 

  • The Topix Mining Index, which counts oil explorer Inpex Corp. as its largest member, lost 1 percent as crude prices fell. Refiner JX Holdings Inc. slid 0.1 percent.

  • Fast Retailing Co. was the biggest drag on the Nikkei 225 Stock Average, falling 4.2 percent, and accounting for almost half the losses on the measure. Nomura Securities Co. said customer numbers were “somewhat disappointing.”
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