Asia markets plunge on Japan stimulus shock

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But hint of yen intervention slows surging currency

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TOKYO: Tokyo stocks plunged more than three percent as a surging yen hit exporters Monday, leading a sell-off across Asia in holiday-thinned trade and after worries about the global economy fueled sharp losses in New York and Europe.

The losses in Tokyo come after the Bank of Japan’s shock decision Thursday not to unveil any fresh stimulus, while US data also left dealers disappointed. Japan markets were closed Friday for a public holiday.

By the break Monday, Japan’s Nikkei was down 3.6 percent, while Sydney shed more than one percent and Wellington 0.4 percent. Seoul lost 0.6 percent and Manila slumped 1.8 percent.

The Nikkei recovered slightly by the end of the session, closing down 3.11 percent at 16,147.38.

Markets in Shanghai and Hong Kong were closed for the May Day public holiday.

Yen intervention
The yen has soared against the dollar since the BoJ decision, which came soon after the Federal Reserve indicated it was keeping its eye on market movements before hiking interest rates again.

The greenback bought 106.42 yen Monday, slightly up from late Friday in New York but well down from the levels above 111 yen before the BoJ’s surprise announcement.

The currency eased after comments over the weekend by Japan’s Finance Minister Taro Aso, who on Saturday called the yen’s rise “extremely worrying.”

“The yen strengthened by five yen in two days. Obviously one-sided and biased, so-called speculative moves are seen behind it,” Aso told reporters.

“Tokyo will continue watching the market trends carefully and take actions when necessary.”

Aso has reiterated that Japan could intervene in forex markets to stem the unit’s steep rise, saying moves to halt the currency’s speculative rally would not breach a G20 agreement to avoid competitive currency devaluations.

Japan last intervened in currency markets around November 2011, when it tried to stem the yen’s rise against the greenback to keep an economic recovery on track after the quake-tsunami disaster earlier that year.

“We expect short-term share market volatility to remain high,” Shane Oliver, the Sydney-based head of investment strategy AMP Capital Investors, told Bloomberg News.

“Failure by the BoJ to do more soon risks unwinding all the progress on inflation expectations seen under Abenomics, particularly with the yen breaking to ever higher levels,” he added, referring to Prime Minister Shinzo Abe’s growth policy blitz.

With the yen rallying, Japan’s exporters were under pressure as it reduces the value of their overseas profits.

US, Europe markets also down
The selling in Asia came after US stocks ended Friday deep in the red as a weak consumer spending reading compounded a below-forecast economic growth result and an uninspiring set of corporate reports.

The Dow slipped 0.3 percent, the S&P 500 was off 0.5 percent and the tech-rich Nasdaq sank 0.6 percent.

In Europe, Frankfurt gave up 2.7 percent and Paris fell 2.8 percent as a strong jump in eurozone growth was offset by another fall in consumer prices that fanned worries about deflation in the bloc. London dived 1.3 percent.

AFP

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