Nikkei down 2.2% on yen, US outlook

Nikkei down 2.2% on yen, US outlook

Tokyo: Nikkei average fell 2.2% on Wednesday, as a stronger yen and a weaker outlook for the US economy depressed exporters like Honda Motor Co Ltd

The Tokyo market extended losses in the afternoon session after falls in other Asian markets further dampened investor sentiment.

“It’s unavoidable to see the market’s fall today, since yesterday’s gain was mostly on rumours of a possible Federal Reserve rate cut," said Kenichi Hirano, operating officer at Tachibana Securities.

“I see only selling, given the downward revision of the US economic outlook and the strong yen."

The Federal Reserve said on Tuesday US economic growth will slow in 2008 to between 1.8% and 2.5%, sharply down from the 2.5 percent to 2.75 percent forecast in June, before picking back up in 2009.

The dollar extended its fall in the afternoon, slipping to 109.30 yen edging back towards an 18-month low hit earlier this month, and traders said stocks were likely to take their cue from it throughout the day.

As of 0449 GMT, the Nikkei slid 338.18 points to 14,873.34. The broader TOPIX fell 1.9% to 1,441.88.

Exporters extended losses in tandem with the dollar’s fall, with Honda down 4.5% at 3,610 yen and TDK Corp losing 3.8% to 7,420 yen. Canon Inc shed 2.6% to 5,350 yen.

One bright spot is Nippon Sheet Glass Co Ltd Its shares rose 4% to 592 yen after it said first-half operating profit grew more than threefold thanks to the addition of Britain’s Pilkington, which it bought in June 2006.

Oil and gas developer INPEX Holdings Inc rose 3.6% to 1.15 million yen after oil prices matched an all-time high on Tuesday on the weak dollar and supply concerns heading into winter.

Mitsubishi Paper Mills Ltd gained 5.8% to 222 yen after a ratings upgrade by Nikko Citi to “buy" and an announcement on Tuesday that it had agreed with Oji Paper Co Ltd to a business and capital tie-up in which Mitsubishi will raise 1.77 billion yen ($16 million) by issuing new shares to Oji.