Tokyo stocks fell sharply on September 8. The Nikkei 225 closed at 65,269, down 1,130.51 points, or 1.70 percent, handing back most of the previous day’s 1,378-point jump. The broader TOPIX lost 75.47 points, or 1.83 percent, to finish at 4,050.33.
The cause was the yen. It climbed as high as the 153 range against the dollar, its strongest level since February 18, as investors unwound short-yen and carry-trade positions. They were pricing in faster Bank of Japan tightening after stronger wage data and an upward revision to April-June growth.
Exporters take the hit
A stronger yen eases imported inflation for households and companies. It also cuts the yen value of what exporters earn abroad. Toyota, Honda and other automakers had enjoyed a tailwind with the dollar near 160 yen, and the move toward 153 took most of it away. Makers of machinery, electronic components and precision instruments with big overseas sales were sold as well.
Speed made it worse. After months in which weak-yen earnings expectations had propped up Japanese equities, a sharp swing left investors little time to rebalance.
The selling spread beyond expensive tech shares to exporters, financials, machinery and precision instruments. TOPIX, which had often outperformed the Nikkei during bouts of AI and semiconductor volatility, lost that edge.
The chip rally unwinds
On September 7, chip and AI shares lifted the Nikkei even though few stocks rose with it. SoftBank Group, Advantest and Tokyo Electron accounted for much of the gain. A day later, with the yen surge and a global risk-off mood in charge, investors were less willing to chase them. Advantest, Tokyo Electron, SoftBank, Kioxia, Fujikura, Furukawa Electric, Ibiden, Renesas, Rohm, Lasertec and Kokusai Electric all stayed on traders’ screens, but the broad decline showed that AI demand cannot shield the market from currency and rate shocks.
Until recently, the question was whether Japanese authorities would step in again to stop the yen sliding past 160. On September 8 it became whether rapid yen strength would hurt exporters and equity sentiment.
Wages and the Bank of Japan
Revised government data showed the economy grew at an annualized 1.4 percent in April-June, faster than first estimated, because business investment was less weak than reported. Wages gave a firmer signal. Inflation-adjusted real wages rose 2.4 percent in July from a year earlier, the biggest rise since May 2021 and a seventh straight monthly gain. Average nominal wages rose 4.7 percent to 436,401 yen, the fastest increase since January 1997. Bonuses and other special payments, up 6.3 percent, helped lift the total. The inflation rate used for the real-wage calculation rose to 2.2 percent in July from 1.9 percent in June.
Markets widely expect the Bank of Japan to raise rates at its September 17-18 meeting. The bank held at 1 percent on July 30-31, with board member Hajime Takata dissenting in favor of 1.25 percent. Analysts cited by Reuters expect small increases rather than one large move.
The 10-year Japanese government bond yield has been hovering near its highest in about 30 years, after briefly passing 3 percent earlier this month. Higher yields raise debt-servicing costs for Prime Minister Sanae Takaichi’s government, which is also weighing a growth strategy calling for more than 370 trillion yen in public and private investment through fiscal 2040.
Elsewhere, Reuters reported that Asian stocks fell as the yen surged. Iranian threats in the Gulf pushed oil and Treasury yields higher, and investors stayed cautious ahead of US inflation data and central bank meetings.
Sources
- Nikkei Drops 1,130 Points as Yen Surge Hits Exporters
- Nikkei Slumps as Yen Surges, Hang Seng Dips on Factories Blow
