Japan | Nikkei falls over 1% as U.S. rally falters; BOJ holds steady
A stock quotation board displaying Japan's Nikkei average is seen before a ceremony marking the end of trading in 2016 at the Tokyo Stock Exchange (TSE) in Tokyo, Japan December 30, 2016. REUTERS/Toru Hanai
A stock quotation board displaying Japan's Nikkei average is seen before a ceremony marking the end of trading in 2016 at the Tokyo Stock Exchange (TSE) in Tokyo, Japan December 30, 2016. REUTERS/Toru Hanai

Nikkei falls over 1% as U.S. rally falters; BOJ holds steady

The Nikkei ended the morning down 1.3% at 19,110.91 points.

January 31, 2017 11:11 AM (UTC+8)

Japan’s Nikkei share average fell more than 1 percent on Tuesday, tracking Wall Street lower on concerns that U.S. President Donald Trump’s policies may prove destabilising for the rest of the world.

The Nikkei ended the morning down 1.3% at 19,110.91 points.

“The 19,000 level for the Nikkei is firmer than I thought. I expected it to fall more, but it seems to be holding for now, as investors await more earnings from companies,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank in Tokyo.

The recently stronger yen undermined Japanese shares, she said. The dollar was down 0.2% at 113.63 yen, after tumbling 1.1% on Monday. The broader Topix was down 1.2% at 1,525.67, while the JPX-Nikkei Index 400 also shed 1.2% to 13,680.50.

US stock indexes posted their largest drop so far this year overnight on disappointment that Trump has not yet unveiled details of his promised reflationary economic policies, which had sparked a rally after the Nov. 8 presidential elections.

Trump’s sudden imposition of new immigration curbs last week reminded investors that some of his administration’s policies will have disruptive effects, as they weighed his stimulus and deregulation pledges against his protectionist stance.

Sony Corp. fell 2% after the company said it had booked a 112.1 billion yen ($986.97 million) impairment charge on the goodwill value of its movie segment in the quarter ended December.  NEC Corp tumbled 15.2% after the communications equipment maker slashed its profit outlook for the year ending March 31 as delays to projects squeezed revenue.

Mazda Motor Corp was down 3.9% after Nikkei reported the auto maker’s operating profit is expected to fall short of guidance for the year ending March. Mazda will report its April-December earnings on Thursday.

In one positive sign for Japan, government data on Tuesday showed that factory output rose for a second straight month in December and household spending fell less than expected. The data along with a spate of other readings suggest the economy may be slowly starting to regain some traction.

The Bank of Japan kept monetary policy steady on Tuesday and roughly maintained its upbeat price forecasts, signalling a steady economic recovery will help accelerate inflation towards its 2 percent target without additional stimulus.

In a widely expected move, the BOJ maintained the 0.1 percent interest it charges on a portion of the excess reserves that financial institutions park with the central bank. At the two-day policy meeting that ended on Tuesday, it also kept its yield target for 10-year Japanese government bonds around zero percent.

In an attempt to channel money out to broader sectors of the economy, the central bank extended by a year the deadline for its loan programs aimed at boosting lending to industries with growth potential.

In a quarterly review of its forecasts, the BOJ maintained its projection for core consumer inflation at 1.5 percent for the next fiscal year, which starts in April. It also left unchanged its projection of 1.7 percent inflation for fiscal 2018.

 

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