Tokyo stocks end sharply lower on US, Europe rate hike fears | Busi Knews

Europe Rate Hike Fears

Source

Tokyo stocks ended sharply down Friday, with the Nikkei closing at a one-month low, following sell-offs in international markets overnight on fears over the adverse global economic impact of monetary tightening by U.S. and European central banks.

The yen briefly plummeted against the U.S. dollar immediately after the Bank of Japan said it had decided to keep its ultra-easy monetary policy intact at its policy meeting, drawing a sharp contrast with global counterparts amid surging inflation.

The 225-issue Nikkei Stock Average ended down 468.20 points, or 1.77 percent, from Thursday at 25,963.00, its lowest closing level since May 12. The broader Topix index finished 31.91 points, or 1.71 percent, lower at 1,835.90.

On the top-tier Prime Market, decliners were led by precision instrument, iron and steel, and transportation equipment issues.

The foreign exchange market was volatile, with the dollar trading near the 134 yen line in the afternoon after climbing by around 1 yen from the lower 133 yen zone following the BOJ policy meeting.

The Nikkei briefly tumbled 710 points, or 2.68 percent, in the morning a day after the Bank of England and Swiss National Bank announced interest rate increases in response to high inflation.

The benchmark trimmed some losses in the afternoon, helped by the weakening yen and higher U.S. stock futures, brokers said.

But investors are wary about the possible negative effects of rate hikes, which lead to higher borrowing costs for companies and households, after the latest rate hike announcements followed the U.S. Federal Reserve's decision Wednesday to raise its key interest rate by 0.75 percentage point, its largest increase since 1994.

"Market participants are becoming more worried about recession rather than an economic slowdown caused by aggressive monetary tightening," said Shingo Ide, chief equity strategist at the NLI Research Institute.

"The decision to raise rates by Switzerland's central bank and the BOE came as a surprise, given that European economies have been undermined by the Ukraine crisis," he said. "High inflation has become a global problem for countries to tackle."

The BOJ, on the other hand, maintained its ultraeasy monetary policy at its two-day policy meeting through Friday, and reaffirmed its commitment to unlimited purchases of 10-year government bonds at a fixed rate of 0.25 percent every business day in principle.

Among Prime Market issues, declining issues outnumbered advancers 1,447 to 351, while 40 ended unchanged.

The Nikkei was weighed down by the fall of heavyweight Tokyo Electron that dived 2,550 yen, or 5.0 percent, to 48,040 yen, tracking declines in U.S. counterparts as the tech-heavy Nasdaq index plunged about 4 percent overnight.

Toyota Motor lost 77.0 yen, or 3.6 percent, to 2,063.0 yen, after the carmaker said Thursday it had slashed its global output plan for June due to difficulty in procuring parts and a COVID-19 outbreak at one of its suppliers.

Trading volume on the Prime Market rose to 1,869.65 million shares from Thursday's 1,130.69 million.