Nikkei declined by 5.15% regardless of economics minister’s reassurance
The Japanese Nikkei 225 declined today as the Asian markets had their first chance to react after yesterdays declines, the result or uncertainty and confusion from investors as to the long term likelihood of continued monetary stimulus from the Federal Reserve. Investors also weighed a rise in the value of the Yen, which was up to ¥100.6 against the dollar at the close of play in Tokyo.
Additionally, there has been a lot of concern over the sustainability of Japan’s own monetary easing policy, with investors showing signs of fading confidence in the nations government to find a solution to their long standing deflation problem. Japanese government bonds reached a 1% yield earlier this week, which suggested that investors were ditching the bonds (essentially government debt) in favour of other assets. This morning those bonds were back down to 0.89% following comments from Akira Amari, the Japanese Economics Minister. The bonds have roughly doubled since the quantitative easing programme was announced back in April.
Not too long ago we (ourselves) were writing about correction and how investors were simply waiting for it kick in across the pacific, meanwhile the Japanese markets seemed to be charging on unhindered with the depreciating Yen. With all that focus on the US, investors have been blind sided as the Nikkei has now declined by 14% since last Wednesday. A decline of more than 10% is regarded as correction.
The Nikkei closed down by 737.43 points, or 5.15%, as a result of the action. This has left the index in a daunting position as sharp declines become more frequent over the last week.
With the rising Yen it was exporters who felt the biggest impact today, with Fast Retailing, Asia’s leading clothing exporter, leading the declines with losses of 4150, or 11.11%. Dentsu, an advertising and PR company with a global client base, followed with a drop of 9,51%, closing at 3045.
Kobe Steel fell by 8.50% to close at 140. In all 90 of the index’s constituents registered declines of more than 5%. In fact, only 2 members of the Nikkei 225 registered gains, Yokogawa Electric Corp and Dowa Holdings Co Ltd — who advanced by 2.36% and 0.59% respectively. Yokogawa’s advance was based on the news that it had won a contract to supply the automation and safety equipment in a new line of trains, the value of which is yet to be released.