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Nikkei plunges 2.2pc on rising yen
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TOKYO: Nikkei average dropped more than two per cent on Wednesday as the yen's advance to a fresh 15-year high against the dollar extinguished an upbeat mood gained from last week's better-than-expected economic data.
A revival of concerns over European banks and uncertainty over the political situation in Japan added to the dour mood.
The benchmark Nikkei ended down 2.2 per cent or 201.40 points at 9,024.60 after falling as low as 8,997.63, back towards a 16-month low of 8,796.45 hit on Sept 1. The broader Topix lost 1.7 per cent to 820.99. Wednesday's drop took the Nikkei below 9,190, around its 25-day moving average, which had served as resistance from August until this week. The 25-day moving average is considered a proxy for a one-month moving average and is closely watched in Japan.
Some 1.47 billion shares changed hands on the Tokyo exchange's first section, the lowest volume this week. Declining shares outnumbered advancing ones by 7 to 1.
"With the yen's advance accelerating and worries about credit risks in Europe heightening, the market is pressured by investor concern about risk-taking," said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.
"If inaction by the government despite mentions of intervention by some officials triggers a further advance in the yen, it's hard to think the situation will be fixed soon. As the strong yen is a drag on Japanese stocks, the index could still lose further ground." The dollar fell as far as 83.34 yen on Wednesday, a new 15-year low and down 0.5 per cent on the day, with traders testing Japanese authorities' pain threshold for currency strength. Bank of Japan Governor Masaaki Shirakawa reiterated on Wednesday his reluctance to return to quantitative easing but indicated the central bank was weighing its options on how to deal with the economic impact from the yen's strength. Markets are keeping a close eye on political developments as it could spell a potential shift in how the country copes with the strong yen, weak economy and huge public debt. Shares of blue chip exporters lost ground. Investors fret about a stronger yen as it eats into exporter profits and undermines the sector's competitiveness. Sony Corp fell 2.2 per cent to 2,458 yen and Canon Inc shed 2.1 per cent to 3,510 yen. Honda Motor Co skidded 2.5 per cent to 2,744 yen. Many Japanese companies have assumed a dollar/yen rate of 90 yen and euro/yen of 110-115 yen in the year to March 2011.
Unicharm Corp lost 3.2 per cent to 9,470 yen after the maker of diapers and sanitary napkins said on Tuesday it would raise up to 80.5 billion yen ($961 million) through an issue of euroyen convertible bonds, triggering investor concerns over a dilution to per-share value once the bonds are converted. Unicharm set the conversion price at 11,650 yen. -Reuters
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