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Nikkei tumbles over 2% on futures-led selling

JIJI

The Nikkei average tumbled to the lowest closing level in more than three weeks Wednesday, pressured by the yen’s rise and futures-led selling amid uncertainty over the U.S. fiscal deadlock.

The Nikkei 225 closed down 314.23 points, or 2.17 percent, at 14,170.49, the lowest finish since Sept. 6. The broader Topix index fell for the fourth straight session, ending 18.28 points, or 1.53 percent, lower at 1,175.16.

The Tokyo market kicked off Wednesday’s trading with small gains after Wall Street stocks closed higher Tuesday despite the first U.S. government shutdown in over 17 years. The Nikkei briefly rose more than 80 points in early trading, led by index futures.

But a wide range of stocks came under selling pressure as index futures were dragged down by a wave of selling in the middle of the morning. The key market yardstick extended losses to some 370 points in the afternoon, as the yen firmed against the dollar and other major currencies.

Due to a dearth of fresh incentives after a closely watched tax policy decision Tuesday, investors were reluctant to buy stocks. Prime Minister Shinzo Abe announced Tuesday that the government will go ahead with a plan to raise the consumption tax to 8 percent from 5 percent in April and compile a ¥5 trillion stimulus package in early December. He also signaled readiness to give serious consideration to a cut in the corporate tax.

Mitsushige Akino at Ichiyoshi Asset Management Co. said: “As the economic stimulus package turned out to be in line with media reports, it gave market players no reason to buy and disappointed some who had hoped for some positive surprise. After stocks failed to extend early gains, some investors sold index futures.”

Other market-watchers noted that some hedge funds sold stock index futures and bought Japanese government bond futures, triggering the Nikkei’s downswing.

Declining issues overwhelmed advancing ones 1,502 to 205 in the first section. Volume rose to 2.901 billion shares from Tuesday’s 2.794 billion.

Key JGB yield dips

Japanese government bond prices advanced Wednesday on continued buying, pushing down the benchmark 10-year yield to a five-month low.

In late interdealer trading in cash JGBs, the yield on the latest 330th 10-year issue with a 0.8 percent coupon stood at 0.640 percent, the lowest since May 10.