Japan Stocks fall ahead of BoJ rate review

Headline indices of the Japan share market declined on Tuesday, 31 July 2018, tracking losses seen on Wall Street overnight and the yen edged higher ahead of the Bank of Japan's rate review and the Federal Reserve's meeting later this week. Among TSE33 issues, 22 issues declined, while 11 issues inclined, with shares of Other Financial Business, Electric Power & Gas, Air Transportation, Textiles & Apparels, Metal Products, and Pulp & Paper issues being notable losers, while Marine Transportation, Mining, Rubber Products, Insurance, and Banks issues were notable gainers. Around late afternoon, the benchmark Nikkei 225 index declined 0.4%, or 88.77 points, to 22,456.07. The broader Topix index of all First Section issues on the Tokyo Stock Exchange, meanwhile, dropped 0.7%, or 12.04 points, to 1,756.11.

Overnight in Wall Street, the Nasdaq plunged to its lowest close in more than three weeks, as technology stocks staged a retreat, particularly the so-called FAANG names. The Dow Jones Industrial Average fell 144 points, or 0.6%, to 25,307. The S&P 500 gave up 16 points, 0.6%, to 2,803. The Nasdaq Composite Index shed 107 points, or 1.4%, to 7,630, marking the lowest close for the benchmark since 5 July.

 

Investors are closely watching outcome of the Bank of Japan's two-day meeting later today, with widespread speculation about whether the central bank may be looking to alter its ultra-loose monetary policy. Speculation that the BoJ will dial back its easing also saw yields on Japanese Government Bonds tick up overnight. Other government bond yields edged higher too. Japan's central bank will likely consider taking steps to make its massive stimulus programme more sustainable, such as allowing greater swings in interest rates and widening its stock-buying selection, according to sources..

The US Federal Reserve meets on Tuesday and Wednesday and is widely expected to stand pat while reaffirming the outlook for further gradual rate rises. The market is almost fully priced for a hike in September and leaning toward a further move before year-end.

ECONOMIC NEWS: Japan Industrial Production Down 1.2% On Year In June -- Japan industrial output slipped 1.2% on year in June, the Ministry of Economy, Trade and Industry said on Tuesday, following the 4.2% jump in the previous month. On a monthly basis, industrial production skidded 2.1%, following the 0.2% drop in May.

NEWS FROM THE PRESS: BOJ Caps 10-Yr JGB Yield at 0.1% in Fixed-Rate Op -- The Bank of Japan on Monday afternoon announced to buy an unlimited amount of Japanese government bonds with a remaining life of 5 to 10 years at a fixed-rate of 0.100%, the same rate as seen in the previous similar operation on Friday. The recent fixed-rate market operations indicate the BOJ considers the 10-year bond yield at 0.1% the upper limit of its unofficial range for the policy target of keeping the yield "around zero%" under the current policy framework, which may be reviewed at the July 30-31 board meeting.

CURRENCY NEWS: The Japanese yen was tad stronger against U.S. dollar on Tuesday, with investors focused on the Bank of Japan's decision at the end of its policy meeting later in the day. The Japanese currency traded at 111.05 to the dollar.

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