Japanese shares choppy again, BOJ deputy seeks to soothe market
07/08/2024 04:19
(Updates with market reaction to Uchida's comments in paragraph
9 onwards, price levels as of midday break)
By Brigid Riley
TOKYO, Aug 7 (Reuters) - Japanese shares swung up and
down in morning trade on Wednesday in a rollercoaster week of
double-digit losses and gains that led the Bank of Japan's
deputy governor to reassure the market there would be no
interest rate rises amid the volatility.
The Nikkei .N225 was up 2.3% at 35,464.61 by the midday
break, after falling more than 2% earlier in the session.
The broader Topix .TOPX was up 3.3% at 2,514.52.
The moves follow a 10% jump in the Nikkei on Tuesday, its
third biggest one-day percentage gain, as the index clawed back
most of its losses from Monday's 12% plummet.
The double-digit plunge was the market's biggest single day
rout since the 1987 Black Monday crash.
Fears of U.S. recession risks and the unwinding of
investments funded by a cheap yen sparked market stress, and a
hawkish turn by the Bank of Japan (BOJ) last week raised alarm
about how fast the central bank would tighten monetary policy.
BOJ Deputy Governor Shinichi Uchida addressed those
worries on Wednesday, saying it won't hike rates when financial
markets are unstable.
"As we're seeing sharp volatility in domestic and
overseas financial markets, it's necessary to maintain current
levels of monetary easing for the time being," Uchida said in a
speech to business leaders in the northern Japan city of
Hakodate.
While the yen had appreciated again since reversing on
Tuesday from a seven-month peak hit at the beginning of the
week, it weakened against the dollar following Uchida's remarks.
"His comments have become a trigger for slowing down the
pace of unwind in the yen's carry trade," said Kentaro Hayashi,
senior strategist at Daiwa Securities.
The Nikkei's moves are not directly driven by yen carry
trades, however a rising or volatile yen impacts corporate
earnings and influences decisions by Japanese retail and
institutional investors on allocations to their home markets.
The market rallied in the wake of Uchida's comments,
with the Nikkei gaining as much as 3%, further narrowing losses
from the plunge on Monday.
Comments from Federal Reserve officials this week and more
economic data have also soothed some concerns of a downturn in
the United States, but market participants are keeping a
vigilant eye on developments.
"The biggest concern in the markets ahead will be whether
fears of a U.S. recession will ease," leaving them highly
sensitive to inflation and jobs data for the time being, wrote
Morgan Stanley MUFG analysts in a note to clients.
Looking further ahead, a lot will depend on whether BOJ
allows the virtuous inflation cycle to play out, said Chi Lo,
senior market strategist, Asia Pacific, at BNP Paribas Asset
Management.
"If the BOJ remains accommodative despite policy
normalisation ... the Japanese stock market’s longer-term
outlook should remain benign."
Among individual shares, the largest percentage gainers
in the Nikkei were Disco Corp 6146.T up 13.61%, followed by
Mitsubishi Heavy Industries 7011.T gaining 12.58% and Canon
Inc 7751.T up by 10.8%.
Heavyweights SoftBank Group 9984.T and Tokyo Electron
8035.T rallied 6.2% and 3.1%, respectively, to give the index
the largest lift.
(Reporting by Brigid Riley and Junko Fujita; Editing by Sonali
Paul)
((brigid.riley@thomsonreuters.com;))