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Nikkei dives on yen rise, Fed-induced sell-off in N.Y.

JIJI

Stocks took a sharp downturn Thursday, battered by a sell-off on Wall Street stemming from a Fed announcement and a show of renewed strength by the yen.

The Nikkei 225 stock average lost 376.85 points, or 2.45 percent, to end at 15,007.06 after surging 403.75 points Wednesday. The Topix shed 32.09 points, or 2.55 percent a day after climbing 31.87 points.

The market suffered a precipitous fall immediately after the opening and remained under strong selling pressure for the rest of the day, after the Dow Jones industrial average sank to a three-month low overnight on the release of the Federal Reserve’s decision to reduce its asset purchases by an additional $10 billion per month.

Though the Fed decision to continue tapering quantitative easing was in line with market expectations, worries about emerging economies rekindled because the U.S. central bank made no comments on their currency and other problems in a statement issued after its policy-setting Federal Open Market Committee meeting, brokers said.

The Nikkei gave up more than 530 points in midmorning trading, though it managed to end the day above the 15,000 threshold.

Export-oriented stocks were also hit by the dollar’s drop to around ¥102 on risk-averse selling, they said.

The Fed dashed investors’ hopes that it would assert in its statement that the global economy is still on a firm footing despite the turmoil in emerging economies, an official at a bank-affiliated brokerage said.

The TSE’s losses were expanded by the unwinding of arbitrage positions with futures to cash in gains in a growing risk-off mood, the official added.

On emerging markets, Yoshihiko Tabei, chief analyst at Kazaka Securities Co., pointed out that the Chinese economy has shown relatively positive developments, such as a business pickup, despite shadow banking and bird flu problems.

Falling issues far exceeded rising ones 1,687 to 78 in the first section, while 15 issues were unchanged. Volume increased to 3.041 billion shares from 2.363 billion Wednesday.

JGBs hit ceiling for now

Japanese government bonds gained ground Thursday but were top-heavy.

The lead March futures contract on 10-year JGBs closed up 0.17 point from Wednesday at 144.72. Volume fell to 24,160 contracts from 32,528.