Nikkei in Japan Retreats from Early Gains Amid Rising Concerns of Rate Hike

11 Sep, 2023

Nikkei in Japan Retreats from Early Gains Amid Rising Concerns of Rate Hike

Japan's Nikkei stock average reversed its early gains on Monday in response to concerns raised by a report suggesting a potential early end to the Bank of Japan's (BOJ) negative interest rate policy. The Nikkei declined by 0.19% to reach 32,544.04 during the midday break, despite opening 0.26% higher.

Initially, the index had been tracking the gains seen on Wall Street at the end of the previous week. In an article published in the Yomiuri newspaper over the weekend, BOJ Governor Kazuo Ueda hinted that the central bank might consider ending its negative interest rate policy when it comes closer to achieving its 2% inflation target, implying the possibility of future rate hikes.

Takehiko Masuzawa, the trading head at Phillip Securities Japan, commented on the market's response, stating, "The impact was directly reflected in today's market, with financial stocks leading the gains, while real estate stocks were beaten down. However, the market did not experience a widespread decline. Value shares rose."

The Tokyo Stock Exchange's banking index surged by 3.85%, making it the top gainer among the 33 industry sub-indexes. The insurance sector also saw a rise of 1.74%, and the brokerage sector gained 1.26%. Financial stocks dominated the list of the top 10 gainers on the Nikkei, with Resona Holdings leading the way with a 6% increase. Sumitomo Mitsui Financial Group rose by 4.55%, and Mitsubishi UFJ Financial Group climbed by 3.71%.

On the other hand, property developer Sumitomo Realty & Development experienced a decline of 4.26%, becoming the worst performer on the Nikkei. It was followed by peer Mitsui Fudosan, which lost 4.04%. Chip-related shares also saw declines, with Tokyo Electron and Advantest shedding 2.27% and 2.17%, respectively.

The broader Topix index showed a modest increase of 0.1%, with its value index rising by 0.65%, while the growth index slipped by 0.5%.