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Japan's Nikkei fell to a five-week low on Monday as automakers and other manufacturers were hit by the US Treasury Secretary's comment that Washington wants provisions to deter currency manipulation in its foreign trade deals.
The Nikkei share average stumbled as much as 1.8 per cent to 22,274.94 during morning trade, the lowest point since September 10. It was down 1.4 per cent at the midday break.
“The US comment has made the market very tense,” said Mutsumi Kagawa, chief global strategist at Rakuten Securities. ”While rising raw materials' prices are already a worry for companies, a stronger yen is also a big threat to automakers and other exporters, which may have to cut their profit forecasts.”
A strong yen cuts Japanese manufacturers' competitiveness in the global market as well as profits made abroad when repatriated.
US-Mexico-Canada pact
US Treasury Secretary Steven Mnuchin had on Saturday told reporters at the International Monetary Fund and World Bank annual meetings in Bali that Washington views the currency chapter in the new US-Mexico-Canada Agreement as a model for future trade deals to deter trading partners from currency manipulation.
“Our objective would be that the currency issues ... We'd like to include (them) in future trade agreements. With everybody. I'm not singling out Japan on that,” Mnuchin said, when asked whether the United States will discuss currencies in trade negotiations with Japan.
Automakers underperformed, with Toyota Motor Corp dropping 2.3 per cent and Honda Motor Co down 2.7 per cent.
Elsewhere, SoftBank Corp tumbled 5.7 per cent, reversing its 4.6 per cent gains on Friday, on concerns over its ties to Saudi Arabia. Saudi Arabia, which provided much of the funding for the SoftBank Vision Fund, is facing growing pressure from world leaders and businesses over the disappearance of a prominent Saudi journalist.
SoftBank shares have also been volatile over the past week on worries about its exposure to various global tech companies while their stock prices were being under pressure.
“Selling (in SoftBank) is more psychological than anything related to worries on its fundamentals,” said Makoto Kikuchi, a chief executive of Myojo Asset Management.
He also said that Monday's weakness in the Japanese stock market was partly due to Nikkei 225's futures selling, which disproportionately puts pressure on the benchmark index's heavyweights such as SoftBank.
Other exporters also lost ground. Precision equipment maker Olympus Corp shed 1.7 per cent and air-purifier company Daikin Industries dropped 2.3 per cent. The broader Topix dropped 1.0 percent to 1,684.72.
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