Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Tokyo market: Strong yen may stall recovery

Nikkei

Yukiko Takai,Yuzo Yamaguchi
Sunday 01 August 1999 00:02 BST
Comments

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

JAPAN'S stock index may fall this week, led by exporters on concern the stronger yen will hurt their earnings overseas when they are converted back to yen. Companies like Sony and Fuji Photo Film may also come under selling pressure as investors worry that a possible rate rise will hurt consumer sentiment in the US.

"The focus is still on the yen," said Takashi Miyazaki, a strategist at Partners Asset Management. "If earnings of electronics industry are hurt by the strong yen, it may delay the country's economic recovery."

Last week, the Nikkei 225 average rose 1.8 per cent to 17,861.86 points. Mr Miyazaki expects the Nikkei will trade between 17,000 and 18,000 this week.

Last Thursday, the dollar fell to its lowest level in five months against the yen, dipping as low as 114.90 after US stocks fell on concern higher labour costs will prompt the Federal Reserve to raise interest rates. Some investors expect the dollar to get weaker if US stocks continue their slide if more economic indicators signal a possible increase in interest rates.

Each one-yen fall in the value of the dollar means large exporters lose several billion yen in operating profit. Sony relies on US sales for one-third of its operating profit.

Some investors are concerned the yen's gain may encourage foreign investors to lock in gains on shares such as Sony, which rose to records earlier this month. "There is a concern that buying from foreign investors is decreasing," said Takashi Otsubo, at Fuji Investment Management, adding that the fall in the Nikkei may be limited as fund managers are expected to continue looking for a chance to invest, Mr Otsubo said.

Japanese bonds are likely to rise as a strong yen will boost the allure of fixed-income securities. "A strong yen is the biggest factor to support bonds," said Masahiro Kami, fund manager at Daiwa SB Investments, as it boosts confidence the central bank will keep rates close to zero as a way to kick-start the economy.

On Friday, the 10-year bond yield fell two basis points to 1.785 per cent. Mr Kami said he expects the benchmark yield to fall to 1.6 per cent in a few weeks.

Analysts were sanguine about the outlook for bonds after Japan's unemployment rate rose to a higher than expected 4.9 per cent in June from 4.6 per cent in May. "It's impossible for the central bank to drop its zero-rate policy unless the unemployment rate peaks out," an analyst said.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in