Japan Stocks Fall on Stimulus Draft Details as Oil Shares Slide

  • LDP plan shows $45 billion in spending boost this year
  • Energy explorers lead losses after crude enters bear market

What Does Abe's Stimulus Plan Hope to Do for Japan?

Japanese shares fell the most in about a month as investors weighed reports outlining the details of the country’s stimulus package and oil explorers slid on lower crude prices.

The Topix index retreated 1.6 percent to 1,300.2 at the close in Tokyo and the Nikkei 225 Stock Average sank 1.5 percent. Oil traded near $40 a barrel in New York after falling into a bear market on concern the global supply glut will expand. The Japanese government is set to announce 4.6 trillion yen ($45 billion) in extra spending for the current fiscal year, according to a draft obtained by Bloomberg of the plan being discussed by ruling party lawmakers ahead of a cabinet meeting later Tuesday.

“Investors seemed to have hoped that the government would pull through with a little more spending at the very last moment, but since this hasn’t materialized it’s brought on some selling after the fact,” said Tomoichiro Kubota, a senior analyst at Matsui Securities Co. in Tokyo.

The Bank of Japan said on Friday it will almost double exchange-traded-fund purchases to 6 trillion yen a year. Since then, the Topix has dropped 1.7 percent, with the gauge extending declines in the afternoon, when the BOJ typically purchases shares.

“There were hopes that the BOJ would start doubling the amount it purchases in ETFs from today,” said Tomoichiro Kubota, a senior analyst at Matsui Securities Co. in Tokyo. “But there’s speculation that the amount is unchanged. For those who had hoped for buying with more impact, today has been a little disappointing.”

Stimulus Detailed

Abe revealed the overall size of the package in a speech last week, saying more investment was needed to boost the world’s third-largest economy. The stimulus plan will include 13.5 trillion yen of fiscal measures, including 7.5 trillion yen in new spending starting this year, and 6 trillion yen in low-cost loans, according to a draft of the plan.

“Foreigners had focused on the overall numbers last week when Prime Minister Abe announced the stimulus will be 28 trillion yen,” said Osamu Takashima, a Tokyo-based strategist at Citigroup Inc. “But it’s likely that they’ll now see that actual stimulus hasn’t lived up to their hopes.”

Banks and carmakers were the biggest drags on the Topix, with all 33 industry groups falling.

  • Mitsubishi UFJ Financial Group Inc. dropped 5.9 percent after reporting a 32 percent decline in net income in the first quarter from a year earlier, as negative interest rates lowered lending income and the company slowed sales of its shareholdings.
  • ANA Holdings Inc. retreated 4 percent after the Nikkei newspaper reported the airline’s operating profit last quarter is likely to be around 20 percent less than last year amid fiercer competition from budget operators on Japan-China routes.
  • Nippon Soda Co. surged 6.4 percent after the chemical-products manufacturer said it’ll spend about 2 billion yen buying back shares.

The yen gained 0.3 percent to 102.09 a dollar after weakening 0.3 percent on Monday. Futures on the S&P 500 Index climbed 0.2 percent. The underlying measure fell 0.1 percent on Monday, retreating after briefly approaching a fresh record, as falling crude prices sparked a sharp selloff in energy shares, denting confidence that U.S. growth and corporate profits will rebound.

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