Tokyo stocks dipped 3.2 percent yesterday, driven down by profit-taking and a stronger yen after a rollercoaster ride last week that included a 7.3 percent one-day fall.
The benchmark Nikkei 225 index lost 469.80 points to 14,142.65, while the TOPIX gave up 3.35 percent, or 40.01 points, to 1,154.07.
“Investors’ profit-taking movement is continuing as markets in New York and London are closed today, and they might want to watch the currency market,” Mizuho Securities analyst Masahiro Yamaguchi said.
The Tokyo stock exchange was going through an adjustment period, Yamaguchi said, adding: “This is part of reaction to gains in recent weeks in the Tokyo market.”
The Nikkei had been making steady gains until Thursday, when the benchmark index plummeted 7.3 percent after disappointing data out of China stoked fears about the world’s second-largest economy, a major trade partner with Japan.
The Nikkei had gained about 60 percent over the past six months under the pro-spending, pro-growth policies of Japanese Prime Minister Shinzo Abe, who took office last year after landslide elections.
Aggressive monetary easing by the Bank of Japan has helped push down the yen, which in turn tends to lift shares of Japanese firms as it makes them more competitive overseas and inflates the value of repatriated foreign earnings.
However, with the yen rising yesterday, investors were also fretting that “the momentum of ‘Abenomics’ benefits might be waning,” Eiji Kinouchi, senior strategist at Daiwa Securities Capital Markets, told Dow Jones Newswires.
“If the government can’t explain how Japan is going to achieve growth and organize its finances, Japan may face criticism again for its aggressive monetary easing policy,” Kinouchi said.
Meanwhile, minutes of a Bank of Japan (BOJ) meeting on April 26 showed divisions on the policy board, where “a few” members see difficulties meeting a 2 percent price goal by the end of March 2016. One member said the bond market could become unstable again, while others said that swings in financial markets had been triggered by perceptions that the bank had conflicting goals — trying to push down interest rates while pursuing inflation.
“A few” policymakers said at the BOJ meeting last month that it’s “highly uncertain whether changes in inflation expectations would lead to a rise in the actual rate of inflation,” according to the record released yesterday in Tokyo.
According to JPMorgan Chase & Co, the BOJ uses the term “a few” to mean two.
On Sunday, Kuroda told the Japan Society of Monetary Economics at Hitotsubashi University, where he was once a professor, that there was “no sign at this point of excessively bullish expectations in asset markets or in the activities of financial institutions.”
He also restated that, while central bank asset purchases are intended to drag yields down, the reverse may happen in an improving economy.
“Kuroda should have explained why the market is volatile now and why he thinks it’s going to be OK, rather than just saying he doesn’t see any major problem,” said Kazuhiko Ogata, chief Japan economist at Credit Agricole in Tokyo. “Kuroda hasn’t yet learned how to communicate well with the market.”