Asian Stocks Drop as Kuroda’s Comments Weigh on Japanese Shares

  • Kuroda rejects helicopter money in a BBC interview in June
  • The Asia Pacific stock index pares a second weekly advance

Asian stocks retreated from an eight-month high as consumer-discretionary companies led losses and Bank of Japan chief Haruhiko Kuroda’s opposition to so-called helicopter money dragged Tokyo equities lower.

The MSCI Asia Pacific Index declined 0.5 percent to 134.08 as of 4:10 p.m. in Hong Kong, paring its advance this week to 0.3 percent. The Topix index slipped 0.9 percent led by exporters, trimming its gain for the week to 0.8 percent. Investors focused on the comments from Kuroda, even after a Nikkei newspaper report said Japan’s stimulus package could be as large as 30 trillion yen ($283 billion).

At this stage there is "no need and no possibility for helicopter money," Kuroda said in a BBC Radio 4 program that was aired Thursday and that the broadcaster said was recorded on June 17. “At this moment, the Bank of Japan has three options with quantitative and qualitative easing with negative interest rates." These current policies can be expanded if needed and there are no significant limitations to further monetary stimulus, he said.

“The comments will disappoint investors who had been selling the yen in anticipation of the Bank of Japan announcing helicopter money at its meeting next week,” said Jasper Lawler, a London-based analyst at brokerage CMC Markets Plc. “After the failure of its current quantitative easing program to boost inflation, helicopter money is one of the few remaining tools in the Bank of Japan’s arsenal.” He added that Kuroda may have changed his opinion in the last month since he gave the interview, which came before the U.K.’s vote to leave the European Union.

Global stocks added almost $5 trillion in three weeks on bets central banks will stoke growth, pushing valuations on the Asia Pacific index to the highest level this year. Earnings have also played a part, with positive surprises helping lift the S&P 500 Index to a record. Some of that optimism subsided Thursday as signs faded that profits will be able to sustain equities at elevated valuations.

The yen strengthened 1 percent in the last session after Kuroda’s comments, which come ahead of a policy meeting next week and as Prime Minister Shinzo Abe’s government prepares a fiscal spending package in an effort to support growth. People familiar with the discussions at the central bank have indicated that an increasing number of officials at the BOJ are concerned about the sustainability of the current framework for massive monetary stimulus.

Bull Market Retreat

China’s Shanghai Composite Index declined 0.9 percent, sending the benchmark index to its first weekly drop in a month, as consumer and energy companies retreated. The Hang Seng China Enterprises Index slipped 0.3 percent. Hong Kong’s Hang Seng Index fell 0.2 percent, retreating from a bull market. The gauge erased 2016 losses this week after extending gains from a February low to 20 percent.

Australia’s S&P/ASX 200 Index decreased 0.3 percent, Taiwan’s Taiex index lost 0.5 percent and South Korea’s Kospi index declined 0.1 percent. Singapore’s Straits Times Index slipped 0.2 percent. 

Indonesian stocks sank for a second session after the central bank refrained from cutting interest rates on Thursday. New Zealand’s S&P/NZX 50 Index, the world’s best performing developed-market gauge this year, advanced 0.2 percent.

Nissan Motor Co. fell 3.5 percent, pacing losses among Japanese exporters. CGN Power Co. and China Shenhua Energy Co. dropped at least 2 percent in Hong Kong after their parent companies said they haven’t held discussions on a merger. Keppel Corp. slipped 2.2 percent in Singapore after the world’s biggest oil-rig builder said it sees little prospect of an improvement in global demand amid a supply surplus that’s caused quarterly profit to fall to the lowest in almost a decade.

E-mini futures on the S&P 500 added 0.1 percent. U.S. stocks declined Thursday as results from companies including Intel Corp. and Southwest Airlines Co. disappointed. The S&P 500 fell the most in two weeks after closing Wednesday at a record high.

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