Japanese Stocks Erase Most of Post-Brexit Rally as Yen Gains

  • Topix reverses gain, hitting lowest level since June 24
  • Developer shares drop as investors await U.S. jobs report

Japanese stocks fell, extending a weekly decline, as the yen strengthened before a U.S. jobs report that may provide clues on monetary policy.

The Topix index slid 1.3 percent to 1,209.88 at the close in Tokyo, reversing an earlier gain and ending about five points away from a low reached after the U.K.’s vote to leave the European Union. The Japanese currency rose 0.3 percent to 100.44 per dollar, climbing for a fourth day. The Nikkei 225 Stock Average index slid 1.1 percent.

“We had a little spark at the open but we’re now seeing it give that back,” said Andrew Sullivan, managing director of sales trading with Haitong International Securities Group Ltd. in Hong Kong. “Obviously the currency is a big factor. If the currency is going to see significant strengthening, it makes it very difficult for the exporters to do business.”

The yen is trading near the highest levels in more than two years, pressuring earnings for Japanese exporters. The Topix lost 3.6 percent for the week, giving up most of a 4.2 percent rebound in the previous week. The index plunged 7.3 percent on June 24 in reaction to the U.K. referendum. 

As investors struggle to assess the impact from the U.K.’s vote to leave the EU, the focus is increasingly turning to key data that may provide clues to the health of the global economy. U.S. payrolls probably climbed by 180,000 in June, according to the median estimate of a Bloomberg survey of economists. The data will be released Friday morning in the U.S.

Japan is also headed for an upper-house election on Sunday, where half the house seats will be contested. Investors are watching whether the ruling coalition will win a two-thirds majority, allowing Prime Minister Shinzo Abe to push forward either his economic policies or a revision of the nation’s pacifist constitution.

“People are also kind of waiting for policy action,” said Yoshihiro Okumura, general manager at Chiba-Gin Asset Management Co., “Japan’s ruling party will likely win the upcoming elections, which in turn, make people hope for a big drive in policy measures.”

Autos makers initially found some relief on Friday as the Japanese currency appeared to steady, but gave up those gains in afternoon trading. The Topix Transportation Equipment Index declined 0.3 percent. Toyota Motor Corp., the world’s biggest automaker, retreated 0.4 percent, erasing an early rally of 1.7 percent.

All but one of the 33 groups in the Topix retreated, led by real estate shares.

  • Nintendo Co. jumped 8.9 percent, the most on the Topix. The company’s new mobile-game app Pokemon Go topped charts for free-to-download games in the U.S. and Australia.

  • The Topix Mining Index dropped 2 percent. Oil explorers Inpex Corp. slid 2 percent and Japan Petroleum Exploration Co. lost 2.7 percent.

Futures on the S&P 500 Index dropped 0.1 percent on Friday. The underlying U.S. equity gauge is down 0.2 percent this week following a 3.2 percent rebound the previous week.

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