The Nikkei average fell sharply Friday, with issues heavily weighted in the key stock index coming under pressure following the Bank of Japan’s announcement of an end to its purchases of Nikkei-linked exchange-traded funds as part of its monetary policy decision.
The 225-issue Nikkei average plunged 424.70 points, or 1.41%, to finish at 29,792.05, following a 302.42-point climb Thursday.
Meanwhile, the Topix index of all first section issues, a 24.48-point winner on Thursday, closed 3.70 points, or 0.18%, higher at 2,012.21, extending its rising streak to a ninth trading day.
Selling outpaced buying from the outset of the day’s trading as investors were discouraged by falls in all three major U.S. stock gauges on Thursday, caused by a further rise in U.S. long-term interest rates.
Both the Nikkei and Topix indexes moved in a narrow range below Thursday’s closings in the morning session amid a wait-and-see mood ahead of the release of the outcome of the BOJ’s two-day policy-setting meeting through Friday.
The Nikkei shed more than 500 points briefly in the early afternoon, after the BOJ announced a decision to limit ETFs it buys to only those linked to the Topix while stopping purchases of those tracking the Nikkei.
While the Nikkei finished substantially lower, the Topix rose back to the plus side in afternoon trading on the back of the BOJ decision.
Many market sources said that the BOJ’s decision on other steps, such as tolerating the key 10-year Japanese government bond yield’s fluctuations to around plus and minus 0.25% and abolishing its target of buying ¥6 trillion in ETFs a year were within the market’s expectations because such measures had been reported by media before the policymaking meeting.
But the central bank’s decision to focus its purchases of ETFs only on those linked to the Topix index “caught investors by surprise,” a strategist at an asset management firm said.
“Issues comprising the Nikkei met with speculative selling following the BOJ’s announcement,” Kazuo Kamitani, strategist at Nomura Securities Co., said. But Kamitani added that the impact of the BOJ decision on the market is “expected to be temporary.”
On the TSE first section, gainers far outnumbered decliners 1,491 to 623 thanks to the rise of the Topix, while 81 issues were unchanged. Volume swelled to 2.101 billion shares from Thursday’s 1.599 billion shares.
Among heavily weighted Nikkei components that took a beating due to the BOJ’s ETF-related decision, clothing store chain operator Fast Retailing and technology investor SoftBank Group plummeted 6.10% and 2.46%, respectively.
Also on the minus side were soy sauce producer Kikkoman and game-maker Konami Holdings.
On the other hand, Nomura Real Estate Holdings climbed 3.08%, thanks to the company’s upward revision to its operating and net profit estimates for the year ending on March 31.
Among other major winners were sushi restaurant chain Kura Sushi and Japan Post Holdings.
In index futures trading on the Osaka Exchange, the key June contract on the Nikkei average dived 570 points to 29,490.
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