Tokyo stocks lost ground again Wednesday, hitting a fresh 16-month low as investor disappointment increased toward policymakers’ inaction to stem the yen’s recent advance.
After falling below the psychologically important 9,000 mark a day earlier, the Nikkei 225 index shed another 149.75 points, or 1.66 percent, to end at 8,845.39, its lowest closing level since April 30 last year, when it finished at 8.828.26.
Meanwhile, the yen traded at 84.56-59 to the dollar as of 5 p.m. after appreciating to 83.60 the previous day, the strongest since June 1995.
A stronger yen adversely affects the earnings of exporters, including high-tech and auto manufacturers.
All 33 sectors on the Tokyo Stock Exchange lost ground, with oil and coal products leading the decline, followed by transport equipment and sea transport.
The bleeding grew worse as disappointment spread after Finance Minister Yoshihiko Noda said he didn’t discuss specific measures to stem the yen’s recent rise during a lunch meeting with Prime Minister Naoto Kan.
“There was a sense of disappointment in the market about a lack of action on the part of Japanese authorities today,” said Yumi Nishimura, senior market analyst at Daiwa Securities Capital Markets Co.
Noda in the morning made comments taken as suggesting monetary authorities would intervene in the foreign-exchange market for the first time in more than six years.
But his talks over lunch with Kan and Chief Cabinet Secretary Yoshito Sengoku produced nothing specific, increasing disappointment among market players.
Then the dollar quickly lost ground as market participants apparently couldn’t find any clues of future government action to stop the yen’s surge.
According to Noda, Kan instructed him to “carefully watch” developments in the currency market.
“I said (to Kan) that I will take appropriate responses when necessary,” Noda said. But he left it uncertain whether the government would step in, saying he “can’t comment on an intervention.”
Noda said the meeting mainly involved analyzing recent economic conditions, acknowledging they didn’t discuss specific measures to deal with the yen’s rise.
The Bank of Japan has been under growing pressure from lawmakers to take additional monetary easing measures to boost the flagging recovery.
The BOJ could expand one of its lending programs for financial institutions, which is currently designed to provide a total of ¥20 trillion as a three-month loan at the bank’s key interest rate of 0.1 percent, sources said.
The BOJ will hold its monthly policy meeting Sept. 6 and 7, but there is speculation the talks could be moved forward.
Sengoku said earlier in the day that the intensified buying of the yen by investors reflects “weak real economies in Europe and the United States.”
He also said it should be determined whether the flow of speculative money has been accelerating the yen’s rise, which he noted has been regarded as a relatively safe asset since the global crisis in 2008.
While there were media reports that Noda may hold talks by phone with U.S. Treasury Secretary Timothy Geithner, Noda told reporters in the morning, “I know there are such reports, but I’ll refrain from commenting.”
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