Tokyo: The Nikkei average fell 1.7% to end at its lowest in three weeks on 19 October as exporters such as TDK Corp were hit by a stronger yen while bank shares dropped on worries over fallout from the global credit squeeze.
Shares in drug maker Kyowa Hakko Kogyo Co surged 16.6% to 1,402 yen as a source close to the matter said beer maker Kirin Holdings Co is in talks to take a majority stake in a deal that could top 300 billion yen ($2.6 billion).
But the main focus of trade on Friday, the 20th anniversary of the “Black Monday” Wall Street crash, was the dollar, which fell to a fresh three-week low against the yen after worse-than-expected earnings were announced by Bank of America,, the No. 2 US bank.
“It’s likely that corporations will become cautious about their outlooks for the second half of this fiscal year, and we may see fewer companies revising up their forecasts because of that,” said Yutaka Miura, senior technical analyst at Shinko Securities.
The Nikkei lost 291.72 points or 1.7% to close at 16,814.37, the lowest close since 28 September. The broader TOPIX index declined 1.6% to 1,591.28.
Investors also shifted funds from stocks to bonds, helping send Japanese government bond futures to a one-month high.
“It looks like bonds are bought but stocks are sold as expectations for interest rate hikes have petered out,” suggesting that the nation’s economic recovery may be slowing, said Yumi Nishimura, manager of the investment advisory section at Daiwa Securities SMBC Co Ltd. And that may be the reason for selling in some domestic stocks such as real estate.
Higher oil prices also put a lid on the market.
“It’s almost stagflation,” said Kazuya Nakamura, deputy general manager at Norinchukin Zenkyoren Asset Management. “Economic conditions in the United States or Japan have not changed much, but the price of oil alone is going up. Companies like food firms may have tough times. With personal consumption remaining feeble, they can’t pass the rise in oil prices on to their sales prices.”
Trade was slow, with 1.7 billion shares changing hands. Decliners outpaced advancers by a ratio of nearly six to one.