Photographer: Tomohiro Ohsumi/Bloomberg

Japan Exporters, Banks Slide Before BOJ Meeting; Defensives Gain

  • Some investors expect BOJ to refer to exit strategy: Daiwa SB
  • Domestic demand stocks better off if yen gains on BOJ: Monji

Shares in Tokyo slipped as the yen held gains against the dollar before the Bank of Japan’s monetary policy meeting on Friday.

Financial shares and exporters slid, weighing most on the benchmark Topix index. Defensive stocks including builders, pharmaceutical companies and retailers advanced. All 43 economists surveyed by Bloomberg forecast the BOJ will keep monetary policy unchanged at its two-day policy meeting ending Friday, with most of them expecting no tightening during Governor Haruhiko Kuroda’s term.

“A certain number of people seem to expect the BOJ could refer to some type of an exit strategy,” which will put downward pressure on local equities, said Soichiro Monji, the general manager of the economic research department at Daiwa SB Investments Ltd. in Tokyo. “If the BOJ considers to proceed with an exit strategy, it will result in strength in the Japanese yen, in which case domestic-oriented companies would be better off.”

Japan’s currency rose 0.5 percent in New York after the Fed Chair Janet Yellen indicated she was pressing ahead with plans to normalize monetary policy and suggested weak readings on inflation won’t persist. The Topix swung between gains and losses in the morning as the yen fluctuated in Tokyo trading.

“It’s a bit unclear to make a call on where the yen is headed from here because you can interpret context of the Fed meeting either way,” said Tetsuo Seshimo, a portfolio manager at Saison Asset Management Co. “Japanese shares do look cheap, still, compared to counterparts like the U.S.”

Summary

  • Topix -0.2% to 1,588.09 at the close in Tokyo after rising as much as 0.4%
  • Nikkei 225 -0.3% at 19,831.82
  • Yen little changed at 109.59 per dollar after gaining as much as 0.3%
  • A gauge of banks -1.5%, as Mitsubishi UFJ Financial -2%, Mizuho Financial -1.7%
  • 10-year U.S. Treasury yield fell 8.5 basis points Wednesday to 2.13%
  • Defensives rise:
    • Among builders, Daiwa House Industry +2.5%
    • Retailers advance with FamilyMart UNY +5.1%
  • TDK -2%; downgraded by Morgan Stanley MUFG as company’s profit targets look challenging
  • Seiko Epson +3.2%, most since Feb. 1; Nikkei reports TSE to demote Toshiba to second section in Aug. Seiko Epson has been cited by Mizuho Securities as most likely to replace Toshiba on Nikkei 225 of Toshiba is demoted

For more on Japan markets:
BOJ Slowing Bond Buys Put Meeting Under Scrutiny for Taper Talk
Japanese Tire Makers Decline After Rubber Futures Rise in Tokyo
Japan Government Fund Backs 500 Startups (Correct)
BNP Paribas to Combine Japan Research Before EU Rules Bite (1)

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