Nikkei ends at 8-week low, US FX comments hit automakers; Softbank sinks

TOKYO: Japan’s Nikkei ended at an eight-week low on Monday as automakers and other manufacturers were hit by news that Washington would seek a provision about currency manipulation in future trade deals, including with Japan.

The Nikkei share average ended 1.8 percent lower at 22,271.30, the weakest closing point since Aug. 21.

The broader Topix dropped 1.6 percent to 1,675.44, the lowest finish level in almost seven months.

“The U.S. comment has made the market very tense,” said Mutsumi Kagawa, chief global strategist at Rakuten Securities. “While rising raw materials’ prices are already a worry for companies, a stronger yen is also a big threat to automakers and other exporters, which may have to cut their profit forecasts.”

A strong yen cuts Japanese manufacturers’ competitiveness in the global market as well as profits made abroad when repatriated.

On Monday, the yen strengthened to 112.07 versus the dollar, building on recent gains, as global risk-off sentiment kept alive safe haven bids on the Japanese currency.

U.S. Treasury Secretary Steven Mnuchin on Saturday told reporters at the International Monetary Fund and World Bank annual meetings in Bali that Washington views the currency chapter in the new U.S.-Mexico-Canada Agreement as a model for future trade deals to deter trading partners from currency manipulation.

“Our objective would be that the currency issues … We’d like to include (them) in future trade agreements. With everybody. I’m not singling out Japan on that,” Mnuchin said, when asked whether the United States will discuss currencies in trade negotiations with Japan.
Automakers underperformed, with Toyota Motor Corp dropping 2.4 percent and Honda Motor Co down 2.6 percent.

Elsewhere, SoftBank Corp tumbled 7.3 percent to 9,251 yen to a level not seen since early August on concerns over its ties to Saudi Arabia. Saudi Arabia, which provided much of the funding for the SoftBank Vision Fund, is facing growing pressure from world leaders and businesses over the disappearance of a prominent Saudi journalist.

SoftBank shares have also been volatile over the past week on worries about its exposure to various global tech companies which have been at the receiving end of a recent sell-off.
“Selling (in SoftBank) is more psychological than anything related to worries on its fundamentals,” said Makoto Kikuchi, a chief executive of Myojo Asset Management.

He also said that Monday’s weakness in the Japanese stock market was partly due selling in Nikkei 225 futures, which puts disproportionate pressure on the benchmark index’s heavyweights such as SoftBank.

Other exporters also lost ground. Precision equipment maker Olympus Corp shed 1.7 percent and air-purifier company Daikin Industries dropped 2.3 percent.

Ono Pharmaceutical declined 2 percent after the company said its potential blockbuster cancer drug Opdivo, which was developed with Bristol-Myers Squibb, failed in its late-stage trial for lung cancer.

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