The Japanese stock market plunged on Thursday, with the TOPIX index experiencing its largest drop since April 2020. Due to the sharp appreciation of the yen on Wednesday, following the Bank of Japan's announcement of a rate hike, exporters were under pressure and the rise in interest rates dragged down real estate stocks. The TOPIX index fell by as much as 3.9%, with all sectors declining. Real estate stocks suffered the steepest drop of 8.1%, while auto stocks declined by 6.4%. Stocks of department stores that had benefited from the surge in tourist spending due to the weakening yen also fell. The index, which had entered a technical correction last week, fell by 3.5%. Mitsubishi UFJ Financial Group, Japan's largest bank, raised short-term discount rates following the Bank of Japan's rate hike on Wednesday, which is considered the benchmark for floating-rate mortgages and other loans. Bank of Japan Governor Haruhiko Kuroda's remarks at the news conference after the stock market closed on Wednesday reinforced the view that interest rates would continue to rise.
In the Japanese stock market's drop on Thursday, real estate stocks, which are highly sensitive to interest rates, took the lead and suffered the largest decline since March 2020, as people worried that mortgage rates would rise after the Bank of Japan raised the benchmark interest rate, thereby weakening demand. A real estate stock index in the TOPIX index saw the largest fall of 6.4%, the worst-performing sector of the index. Japan's largest real estate companies, Mitsui Fudosan Co. and Mitsubishi Estate Co., fell by at least 7%, while Sumitomo Realty & Development Co. saw a drop of as much as 9.4%.$Nikkei 225 (.N225.JP)$Please use your Futubull account to access the feature.
The Bank of Japan raised its policy interest rate by 15 basis points to around 0.25% this Wednesday, prompting Japan's largest bank, Mitsubishi UFJ Financial Group, to raise its short-term preferential interest rate, which is seen as the benchmark for floating-rate mortgage and other loans. BOJ Governor Haruhiko Kuroda's comments at the news conference held after the stock market closed on Wednesday strengthened the view that interest rates will continue to rise.
According to a senior market analyst at Matsui Securities, "Bank of Japan Governor Haruhiko Kuroda seemed to have changed his attitude at the news conference yesterday, becoming tough. The assumption that 'interest rates will not rise, and the yen will not appreciate' has changed."
Moreover, due to the narrowing gap between the policy interest rates of the Federal Reserve and the Bank of Japan, the yen against the dollar rose to its highest level since March. Earlier, the Bank of Japan raised interest rates, while Federal Reserve Chairman Jerome Powell said there could be a rate cut as early as September.
Tetsuo Seshimo, portfolio manager of Saison Asset Management, said, "The Bank of Japan's rate hike has raised two concerns—one is the yen, which is a headwind for exporters who have benefited from it, and the other is whether economic growth will continue. There are still many unknown factors."
Earlier this year, both the Nikkei 225 index and the TOPIX index hit new highs spurred by a weak yen and a surge in global technology stocks. Since then, these gains have reversed as technology stocks driven by artificial intelligence have faltered and concerns about the Bank of Japan's policy path have intensified.
In the Japanese stock market's drop on Thursday, real estate stocks, which are highly sensitive to interest rates, took the lead and suffered the largest decline since March 2020, as people worried that mortgage rates would rise after the Bank of Japan raised the benchmark interest rate, thereby weakening demand.
A real estate stock index in the TOPIX index saw the largest fall of 6.4%, the worst-performing sector of the index.$Mitsui Fudosan (8801.JP)$($Mitsui (8031.JP)$ Mitsubishi Estate, with the stock symbol 8802.JP, fell by at least 7%.$Mitsubishi Estate (8802.JP)$ Sumitomo Realty & Development Co., with the stock symbol 8830.JP, suffered the steepest decline of as much as 9.4%.$Sumitomo Realty & Development (8830.JP)$ Co.) plunged as much as 9.4%.
Editor/ping