Tokyo stocks fall in morning as strong yen weighs after Fed remarks

TOKYO (Kyodo) — Tokyo stocks fell Monday morning, as exporters were pressured by the yen’s strength after the U.S. Federal Reserve chief signaled late last week that interest rate cuts are due for the world’s largest economy.

The 225-issue Nikkei Stock Average fell 419.59 points, or 1.09 percent, from Friday to 37,944.68. The broader Topix index was down 30.39 points, or 1.13 percent, at 2,654.33.

The U.S. dollar weakened in Tokyo to briefly trade in the mid-143 yen range, its lowest level in three weeks, after Fed Chief Jerome Powell’s speech on Friday raised expectations that rate cuts will begin in September.

Anticipation for a narrower U.S.-Japan interest rate differential has been increased by Powell’s comments as well as those of Bank of Japan Governor Kazuo Ueda, who left open the possibility of further interest rate hikes when he spoke at a parliamentary session Friday.

At noon, the dollar fetched 143.93-95 yen compared with 144.35-45 yen in New York and 145.81-83 yen in Tokyo at 5 p.m. Friday.

The euro was quoted at $1.1186-1187 and 161.00-04 yen against $1.1187-1197 and 161.52-62 yen in New York and $1.1119-1120 and 162.13-17 yen in Tokyo late Friday afternoon.

Tokyo stocks were pressured by the yen’s swift appreciation, which reduces exporters’ overseas earnings when repatriated. Automakers with strong presences abroad suffered heavy losses, with Toyota Motor down over 3 percent and Nissan Motor falling more than 4.6 percent.

“Powell’s comments had a strong effect on the currency market,” said Chihiro Ota, assistant general manager of investment research at SMBC Nikko Securities Inc.

“For Japanese stocks, the currency is the most important factor as most Japanese companies have global operations,” Ota said.

Sentiment was also hit by concerns over the Middle East after fighting between Lebanese Shia militant group Hezbollah and Israel intensified over the weekend, raising prospects of higher oil costs, analysts said.