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Nikkei tumbles on yen rise, European worries

JIJI

Stocks fell sharply Tuesday, pressured by heavy selling on the back of the yen’s upsurge and rekindled concerns over the European debt crisis after Italy’s general election.

The Nikkei 225 average closed down 263.71 points, or 2.26 percent, at 11,398.81. On Monday, the key market gauge soared 276.58 points. The Topix sagged 13.93 points, or 1.42 percent, to end at 966.77 after surging 17.22 points the previous day.

Stocks opened with massive losses after the yen attracted surging demand as a safe-haven currency and briefly jumped past 91 to the dollar in New York trading overnight.

Risk aversion moves picked up steam due to growing uncertainty over the course of fiscal reconstruction in debt-laden Italy after the reform-oriented center-right coalition fell short of a majority in the Senate.

Stocks also came under profit-taking pressure after the previous day’s surge, brokers said.

After showing resilience in late morning trading, the Nikkei accelerated its downswing in the afternoon, hit by speculative selling of index futures, as the yen again strengthened against the dollar and the euro, brokers said.

Investors also moved for position-adjustment selling after closely watched events, including the Japan-U.S. summit and the reported selection of the next Bank of Japan leadership team, an official at an investment trust company said.

Still, expectations remain strong for economic policies promoted by Prime Minister Shinzo Abe, brokers said.

Abe showed leadership in effectively declaring Japan’s readiness to enter the Trans-Pacific Partnership negotiations after his summit with President Barack Obama late last week, while the prime minister was given a free hand from his Liberal Democratic Party on Monday in deciding whether Japan should join the TPP talks, Hirano noted.

Italy election aids JGBs

Japanese government bonds advanced further Tuesday in a growing risk-averse mood following Italy’s general election, sending a key 10-year JGB yield to the lowest level in about nine years and eight months.

The yield on the latest 327th 10-year JGB issue with a 0.8 percent coupon briefly fell to 0.675 percent in interdealer trading, the lowest since June 2003 for a key 10-year JGB yield, before standing at 0.680 percent in late trading, down from 0.705 percent late Monday.