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Nikkei suffers plunge on Fed’s exit prospects

JIJI

Stocks fell sharply Thursday, weighed down by selling after U.S. Federal Reserve Chairman Ben Bernanke offered a possible road map to end the Fed’s quantitative monetary policy.

The Nikkei 225 closed down 230.64 points, or 1.74 percent, at 13,014.58. On Wednesday, the key market gauge jumped 237.94 points. The Topix lost 14.76 points, or 1.33 percent, to end at 1,091.81 after rising 20.17 points Wednesday.

The market came under heavy selling pressure from the outset of Thursday’s trading after U.S. equities plunged overnight.

Wall Street’s tumble came after Bernanke suggested the Fed’s possible exit from its quantitative easing policy. At a news conference Wednesday after the Fed’s two-day policy meeting, Bernanke said that if the U.S. economy recovers as expected, the central bank may begin to reduce the pace of its asset purchases later this year and terminate the easing program in mid-2014.

The Nikkei briefly plunged nearly 280 points to fall below the 13,000 line, hit by futures-led selling, brokers said.

The key indexes trimmed losses later in the morning session, backed by buying on dips.

Although the dollar strengthened past ¥97, stock prices lost ground again in midafternoon trading after a flurry of small-lot selling hit index futures on the back of plunges in Asian equity markets such as China and Hong Kong, brokers said.

On the resilience of Tokyo stock prices in the morning after the early selling, Ryuta Otsuka, a strategist in the investment information department of Toyo Securities Co., said, “the fact that Bernanke showed the possible timetable (for ending quantitative easing) signals a U.S. economic recovery.”

Kenji Shiomura, a strategist at Daiwa Securities Co., said: “Views had been mixed in the market as to when the Fed’s easing policy will be reduced and terminated. Bernanke’s reference to the possible timetable was a positive incentive for the market.”

JGBs take a hit

Japanese government bonds fell Thursday after Federal Reserve Chairman Ben Bernanke unveiled a road map to end the U.S. central bank’s quantitative easing policy.

The lead September contract on 10-year JGBs closed down 0.41 point from Wednesday at 142.58, after briefly falling as low as 142.37 in early trading. Volume grew to 35,510 contracts from 22,894.