(Nov 21): Japanese stocks fell as the yen rose for the first time in seven days after Finance Minister Taro Aso said its decline has been too fast and as Prime Minister Shinzo Abe prepares to dissolve parliament ahead of elections.
Toray Industries Inc. slumped 1.4 percent after a 6.4 percent gain yesterday, dragging a measure of textile makers lower. Mazda Motor Corp., which gets 31 percent of revenue from North America, fell 1.3 percent. Oil and coal producers and paper manufacturers led gains among the 33 Topix industry groups. Takata Corp., a maker of airbags linked to deaths of motorists, jumped 6.9 percent after leveraged short-selling of the stock was suspended.
The Topix slid 0.4 percent to 1,391.89 as of 12:42 p.m. in Tokyo, it’s first loss in four days. It is headed for a 0.6 percent decline this week, which would be its first such drop in five weeks. The Nikkei 225 Stock Average fell 0.5 percent to 17,217.54. The yen rose 0.4 percent to 117.80 per dollar after slumping to 118.98 yesterday, its weakest level since August 2007. Japan’s market is shut on Nov. 24 for a public holiday.
“We’re out of good news,” said Naoki Fujiwara, Tokyo- based chief fund manager at Shinkin Asset Management Co., which oversees about $6 billion. “We’re heading toward a three-day weekend and investors are taking profits. The weakening trend for the yen has paused for now, and technically the stock levels are at a point where it’s difficult to buy.”
Too Fast
Japan’s finance chief Taro Aso said the yen has been weakening too fast over the past week, and that sudden currency changes aren’t welcome, regardless if it’s up or down. A similar statement by Aso that the slide in the Japanese currency has been too rapid sent the yen up by the most in almost two years in February.
Abe will dissolve the lower house of parliament today ahead of a December election, scuppering plans for a second increase in Japan’s sales tax as he tries to salvage his reform program after data this week showed Asia’s second-largest economy is in recession. In contrast, house-price and manufacturing reports yesterday signaled strength in the U.S. economy.
The Topix gained the past three days as Abe called the poll and the Bank of Japan kept a pledge to expand the monetary base at an annual pace of 80 trillion yen ($676 billion). In the U.S., policy makers weighed their commitment to holding key rates near zero for a “considerable time,” according to minutes of the Fed’s October review.
U.S. Futures
The Standard & Poor’s 500 Index rose 0.2 percent to a record yesterday. Futures on the measure were little changed today.
The Topix has almost doubled since November 2012, with investors in Japanese stocks about $1 trillion richer, as policies of Abe and the BOJ weakened the yen and spurred inflation. Through yesterday, the measure was up 19 percent from an Oct. 17 low after the central bank added to quantitative easing, the $1.1 trillion pension fund pledged to buy more shares and amid speculation Abe wouldn’t go through with the tax increase.
Abe will delay raising the consumption levy originally planned for next October by 18 months. The vote will be held on Dec. 14, Finance Minister Taro Aso posted in a statement on his website yesterday.
Japan gearing up for elections “might mean we see a bit of a cautious tone today,” Stan Shamu, a markets strategist in Melbourne at IG Ltd., wrote in an e-mail to clients. “It’ll be interesting to see how it plays out as politicians are likely to start getting vocal.”
Election Boost
Japanese stocks tend to rise after elections are called. In 11 elections since 1980, the Topix index has posted average total return of 3.1 percent between the dissolution of parliament and the vote, according to data compiled by Bloomberg and Daiwa Securities Group Inc.
“There’s no major news to make investors wary today, but they’ll focus on the dollar yen moves which were volatile during U.S. trading hours,” said Juichi Wako, Tokyo-based equity strategist at Nomura Holdings Inc. “There may be some adjustment following technical overheating.”