Nikkei stock index plunges on growing BOJ rate hike speculation
Baku, December 1, AZERTAC
The Nikkei stock index plunged Monday to snap a four-day winning streak, hit by a stronger yen and rising long-term yields as remarks from the Bank of Japan governor caused increased speculation that the central bank could raise interest rates this month, according to Kyodo.
The yield on the benchmark 10-year Japanese government bond hit 1.875 percent, its highest level since June 2008, after BOJ Governor Kazuo Ueda said the central bank will weigh the pros and cons of raising its policy rate when its board meets later this month.
The U.S. dollar briefly weakened to the lower 155 yen range in Tokyo after Ueda's speech fueled speculation that the BOJ is moving closer to increasing interest rates, after leaving them unchanged in October for the sixth straight policy meeting.
"Since the market had not fully factored in the possibility of the BOJ rate hike at the December policy meeting, there was room for the yen to strengthen with comments signaling the rate hike," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities Co.
However, "the yen's rise is unlikely to be sustainable, given uncertain prospects of future rate increases even if the BOJ raises rates this time," Yamamoto added.
The 225-issue Nikkei Stock Average ended down 950.63 points, or 1.89 percent, from Friday at 49,303.28. The broader Topix index finished 40.11 points, or 1.19 percent, lower at 3,338.33.
Stocks opened slightly higher after Wall Street advances late last week amid expectations that the U.S. Federal Reserve will cut its benchmark interest rate next week to bolster the world's largest economy.
However, gains were soon erased and the index slipped into negative territory, dragged down by investors locking in gains after the benchmark Nikkei rose more than 1,600 points over the past four trading days.
The Nikkei index later briefly lost over 2 percent, or more than 1,000 points, pressured further by the yen's appreciation that weighed on exporter shares, and growing concern over higher borrowing costs due to rising long-term yields, brokers said.
"The BOJ governor's speech gave the impression that the BOJ is leaning toward rate hikes," indicating Ueda is optimistic about the state of the U.S. economy and the prospect of wage hikes in Japan, said Koichi Fujishiro, senior economist at the Dai-ichi Life Research Institute.
While a stronger yen drove selling, sentiment was also weighed down by declines of shares related to artificial intelligence and semiconductors that had surged in October, he added.
On the top-tier Prime Market, the main decliners were electric power and gas, mining and real estate issues.
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