Japanese stock indexes tumbled to near three-week low on Monday morning after the yen hit a fresh 18-month high against the dollar, hurting the profit outlook for exporters and other shares with profits tied to a weak yen.
The Nikkei share average fell 3.6 per cent to 16,069.71 in late morning trade, and hit its lowest point since April 12.
The yen climbed to an exchange rate of 106.14 yen per dollar after the US Treasury put Japan on a new currency monitoring list along with four other countries that have large trade surpluses with the United States. The report could make it harder for Japan to intervene in currency markets to stem the yen’s gains.
Japan’s major automakers, which rely heavily on export sales for profits, underperformed the sagging Nikkei index. Toyota Motor Corp shares tumbled 4.5 per cent, while shares of Nissan Motor Co Ltd and Honda Motor Co Ltd were each 4.8 per cent lower.
“We’ve started the week with a precipitous drop in Japanese equity as the market responds to the strength of the yen,” said Martin King, co-managing director at Tyton Capital Advisors.
“The Bank of Japan’s decision last week not to extend easing polarised the market and at the moment the voice of the bears is louder. Many will be asking what can be done to depreciate Japan’s currency this time as the BOJ has already come close to exhausting its tool-kit.”
Disappointing corporate earnings and forecasts further weighed on Japanese indexes as Sony Corp fell 4.4 per cent after reporting an annual loss in its crucial image sensor business, while Panasonic Corp slid 7.6 per cent on weaker sales and Murata Manufacturing Co Ltd plunged 14 per cent on soft earnings guidance.
Shares of Takata Corp fell more than 10 per cent after a report said more than 100 million vehicles are likely to be subject to recall globally due to air bag inflators made by the troubled Japanese firm.
The broader Topix declined 3.5 per cent to 1,293.11 in late morning trade, while the JPX-Nikkei Index 400 slid 3.6 per cent to 11,683.53.