Tokyo Stocks Plunge 3% In Morning Trade

AFP/APP

Tokyo: Tokyo stocks fell more than three percent Thursday morning, weighed down by a surge in the yen after the Bank of Japan (BoJ) hiked interest rates and the Federal Reserve signaled a possible cut in its own rates later in the year.

The benchmark Nikkei 225 index sank 3.22 percent, or 1,259.00 points, to 37,842.82, while the broader Topix index lost 3.53 percent, or 98.67 points, to 2,695.59.

The yen stood at 148.86 against the dollar, compared with 149.88 yen in New York late Wednesday and much stronger than levels around 153 yen on Tuesday.

The Japanese market “is expected to start with losses due to the stronger yen, with traders nervously watching the dollar-yen exchange rate,” said senior market analyst Toshiyuki Kanayama of brokerage Monex. Traders are also awaiting Toyota’s earnings report due later in the day, he added.

The Fed signaled Wednesday it could cut rates as soon as September, while the BoJ further unwound its ultra-loose policies by raising borrowing costs for just the second time in 17 years.

The BoJ’s decision, “although anticipated by some experts, caused a stir in the markets,” said Grzegorz Drozdz, a market analyst at Conotoxia. A recent rise in the yen’s value has been “largely due to increasing pressure on the Bank of Japan to raise interest rates in response to inflation,” he added.

Japanese inflation has been above the central bank’s long-standing target of two percent since April 2022. A weak yen benefits Japanese exporters and has boosted the Nikkei to record values in recent years.

“Therefore, the current rapid strengthening of the yen has contributed to the recent sell-off in equities from this market,” Drozdz explained.