Nikkei Slides Nearly 1%
Tokyo's Nikkei 225 tumbled 607 points (0.94%) on Monday, closing at 63,754.90 as a stronger yen and global risk-off sentiment weighed on Japanese equities. The decline snapped a three-session winning streak.
Export-heavy names led the losses, with automakers and electronics manufacturers bearing the brunt of selling pressure. A firmer yen reduces the value of overseas earnings when repatriated, making Japanese multinationals less attractive to foreign investors.
The BOJ's tightrope walk between supporting growth and defending the yen is becoming harder by the day.
BOJ Policy in Focus
The Bank of Japan kept its ultra-loose policy settings unchanged at its July meeting, but Governor Ueda signalled that a rate hike could come as early as September if wage growth data confirms a virtuous inflation cycle.
The 10-year Japanese government bond yield held steady at 2.826%, reflecting the BOJ's yield curve control framework. However, market participants are increasingly pricing in a policy shift before year-end.
Yen Crosses
Against the dollar, the yen weakened to the 144 level, giving back some of last week's gains. The euro-yen cross was broadly flat, while the Australian dollar gained ground against the Japanese currency.
What to Watch
- Wage data due next week — the BOJ's key metric
- U.S. CPI on Wednesday could widen rate differentials
- Chinese demand — Japan's largest export market remains sluggish