Nikkei down 0.4 pct as Yellen sours mood, softer yen helps contain losses

Wed Mar 19, 2014 10:08pm EDT

* Yellen spooks investors by suggesting an earlier start to
Fed rate hikes
    * Foreigners sold record 1.09 trillion yen in Japan shares
last week
    * Real estate shares fall on profit-taking

    By Ayai Tomisawa
    TOKYO, March 20 (Reuters) - Japanese stocks retreated from
one-week highs on Thursday after Federal Reserve Chair Janet
Yellen raised the prospect of interest rate hikes starting
earlier than previously thought, sparking a selloff in equity
markets and lifting the U.S. dollar.
    The weaker yen helped to contain broader market losses as a
softer Japanese currency is generally seen as a positive for
exporters' income. 
    The Nikkei share average fell 0.4 percent to
14,407.74 in choppy mid-morning trade, after rising to as high
as 14,548.76 earlier. Record foreign stock sales last week also
weighed on the market, traders said.
    On Wednesday, Yellen said the Fed might end its bond-buying
program this fall, and could start to raise interest rates
around six months later, earlier than
anticipated.  
   The dollar rose to 102.40 yen, having surged 0.9
percent after Yellen's comments prompted investors to bring
forward the timing of interest rate hikes.
    Exporters were mixed, with Honda Motor Co rising
0.5 percent, Toyota Motor Corp shedding 0.3 percent and
Canon Inc falling 0.3 percent.
    "Investors are avoiding risks amid uncertainties about the
Fed. Also, they don't have to take positions before major events
in April," said Nobuhiko Kuramochi, a strategist at Mizuho
Securities. "For the Japanese market, people want to see how the
April sales tax increase affects the economy and if the Bank Of
Japan reacts to that."
    Tokyo is scheduled to raise the sales tax to 8 percent from
5 percent on April 1, with many brokers worrying that the
economy could take a big hit due to an expected downturn in
consumption.
    Kuramochi said that foreign investors may stay on the
sidelines for now given the Ukraine tensions.
    Last week, foreign investors sold a record 1.09 trillion yen
($10.7 billion) of Japanese stocks, according to data released
by the Ministry of Finance on Thursday, as concerns about the
Ukraine crisis and a slowdown in China rattled investors.
 
    Real estate stocks fell on profit-taking after surging on
the previous day on the back of rising land prices in Japan's
largest cities for the first time in six years in 2013.
    Mitsui Fudosan Co shed 2.9 percent and Mitsubishi
Estate Co declined 2.2 percent.
    Among the key movers, Sony Corp gained 2.0 percent
after the Nikkei reported that the company will reduce by about
three-quarters the number of its parts suppliers to speed up
development of its electronic products. 
    The broader Topix index dropped 0.3 percent to
1,160.34.
    The JPX-Nikkei Index 400, a gauge comprising
firms with high return on equity and strong corporate
governance, was down 0.3 percent at 10,510.18.

 (Editing by Shri Navaratnam)
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