Key Points:
Thursday saw Japan’s Nikkei share average take a sharp tumble as the yen surged following the Bank of Japan’s (BOJ) historic monetary policy meeting on Wednesday.
The BOJ’s decision to raise interest rates to levels unseen in 15 years, along with detailing its plan to reduce its massive bond-buying program, sent ripples through the market.
The yen’s rally to its highest since mid-March, reaching 148.51 per dollar, rattled investors who were already wary after the yen recovered from a 38-year low earlier in July. The market’s initial reaction wasn’t overly hawkish, but the policy uncertainty hanging over the market had been lifted. However, as the yen climbed, concerns grew over the profit outlook for local firms, especially those involved in exports.
SEE: Nikkei plummets with a downtrend of -2.76% on VT Markets app.
The Nikkei briefly fell over 3% during the day before reversing some losses, closing down 2.49% at 38,126.33, ending a streak of three consecutive days of gains. Meanwhile, the broader Topix index slid 3.24% to 2,703.69, marking its worst daily performance since March 2020.
Export-related companies were among the hardest hit as a stronger yen negatively impacts repatriated revenues. Fast Retailing declined by 1.3%, and Sony Group Corp saw a drop of 3.3%.
Amidst the downturn, individual stocks showed varied performances. Advantest stood out as a big winner, with its stock soaring 13.8% after the company raised its full-year operating profit forecast by 53%.
In contrast, Toyota Motor’s stock plummeted by 8.48%, becoming one of the biggest drags on the Nikkei, as investors were unimpressed by the automaker’s 17% rise in first-quarter operating profit.
The transport equipment sector, which includes major automakers, fell 6.6%, highlighting the broader impact on export-dependent companies. Japanese equities are likely to remain volatile in the short term until the USD/JPY exchange rate stabilises.
The recent movements in the yen and the BOJ’s policy shift have introduced a level of uncertainty that will likely keep markets on edge for the near future.
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