Japan Stocks Hit From Abroad Again as Topix Wipes Out 2017 Gains

  • Dollar weakness after Fed translates into strengthening yen
  • Sony profit plunges as earnings season takes a back seat

What Are the Takeaways From Today's Fed Meeting

Japan’s equity market found itself hostage to global events yet again.

This time it was the Federal Reserve, which signaled it’s in no hurry to raise rates, pushing the U.S. dollar lower and strengthening the yen. Like clockwork, shares fell, with the benchmark index wiping out all gains for the year. Then the 10-year yield rose above 0.1 percent, outside the Bank of Japan’s target range, raising questions about how Governor Haruhiko Kuroda will react.

One of the busiest weeks of earnings season almost took a back seat Thursday, at least until Sony Corp. reported a whopping 84 percent plunge in third-quarter net income at the close -- and cut its full-year forecast for a second time. As investors watch for the latest developments with U.S. President Trump on Friday, they’ll also be checking out how 151 Topix index companies do when they post their quarterly results.

Bond yields were pushed higher as demand wasn’t strong during the auction on Thursday, said Masahiro Ichikawa, a senior strategist at Sumitomo Mitsui Asset Management Co. in Tokyo. “If the BOJ intends on keeping 10 year yields below 0.1 percent, they will increase purchases for bonds maturing between five to 10 years but if not, it’ll be a negative for stocks by strengthening the yen.”

The Topix is down 0.5 percent this year after a strong start in January. The gauge extended declines in afternoon trading Thursday after erasing an intraday gain of 0.2 percent. The BOJ on Tuesday left its monetary policy unchanged, keeping the 10-year JGB yield target around zero percent. The Federal Open Market Committee also kept policy on hold Wednesday and used language similar to the previous meeting to say consumer spending has risen moderately, while business fixed investment remained soft.

The FOMC statement “was a bit disappointing because they seem so cautious about future rate hikes,” said Soichiro Monji, general manager of the economic research department at Daiwa SB Investments Ltd.

Summary

  • Topix -1.1% to 1,510.41 at the close in Tokyo
  • Nikkei 225 -1.2% to 18,914.58
  • Yen +0.6% to 112.57 per dollar
  • Electric appliance makers weigh most on the market; Mitsubishi Electric -4.8%
  • Banks index down 1.5%; Mitsubishi UFJ Financial Group -0.8%
  • Chugai Pharmaceutical +8.8%, top performer on Nikkei 225 after forecasting full-year core operating profit will rise 14% to 92 billion yen ($816 million), in year ending Dec. 31
  • Hitachi +1.2%; Goldman Sachs raises target price on the stock 3.9% following 3Q results that beat estimates
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