Stocks retreated sharply Monday, weighed down by massive selling amid concerns over debt problems in Cyprus.
The 225-issue Nikkei average closed down 340.32 points, or 2.71 percent, at the day’s low of 12,220.63. On Friday, the key market gauge climbed 179.76 points. The Topix index of all first-section issues fell 23.31 points, or 2.22 percent, to end at 1,028.34, also the day’s low, after rising 13.48 points the previous trading day.
The Tokyo market kicked off the week with sharp losses after the euro tumbled against the yen on growing wariness over Cyprus’ debt problems.
Cyprus decided during the weekend to impose taxes on bank deposits in exchange for financial aid from eurozone economies.
The Nikkei average accelerated its downswing in the afternoon, pressured by selling on export-oriented issues after the yen strengthened further against the dollar and the euro, brokers said.
“The Cypriot debt issue came as a surprise to the market. Whether it will continue to weigh on Tokyo stocks depends on Wall Street’s reaction tonight,” said Takuya Takahashi, senior market analyst at Daiwa Securities Co.
Still, most analysts agreed that Monday’s selling was part of selling to cash in gains on the rapid rise of stock prices since mid-November. The Nikkei average rocketed some 45 percent in some four months since Nov. 14, when then-Prime Minister Yoshihiko Noda expressed his intention to dissolve the House of Representatives for an election.
“The timing of the correction was good,” Takahashi said, noting the market was ripe for correction.
The course of the Cypriot debt problems needs to be watched closely, but investors have strong appetite for buying on dips, backed by hopes for “Abenomics,” or economic policy measures promoted by Prime Minister Shinzo Abe, and a U.S. economic recovery, an official at a major securities firms said.
Falling issues paced rising ones 1,179 to 453 in the TSE’s first section, while 75 issues were unchanged. Volume fell to 3.113 billion shares from Friday’s 3.886 billion. All 33 sector subindexes of the TSE’s first section retreated.
The firmer yen battered electronics giant Sony, camera maker Canon, and automakers Toyota and Honda.
Shipping firms Kawasaki Kisen, Nippon Yusen and Mitsui O.S.K. Lines were hit by profit-taking.
Megabanks Mitsubishi UFJ, Sumitomo Mitsui and Mizuho closed lower, along with insurer Dai-ichi Life and Tokio Marine.
But Daiei shot up 33.76 percent after media reports that retail giant Aeon plans to buy shares in the retail chain from trading house Marubeni, brokers said.
Also on the plus side were JAL, engineering firm Japan Drilling and mobile game site operator Gree.
JGBs up sharply
Japanese government bonds rose sharply Monday as concerns about the European debt problem rekindled by confusion over a Cyprus bailout spurred investors to buy safe haven JGBs.
The lead June futures contract on 10-year JGBs finished up 0.26 point from Friday at 145.45. Turnover fell to 17,930 contracts from 20,427.
In late interdealer trading in cash JGBs, the yield on the latest 328th 10-year issue with a 0.6 percent coupon was at 0.585 percent, down from 0.620 percent.