FX168 Financial News (Asia Pacific) News The Tokyo stock market declined on Friday (September 13), affected by continued strengthening of the yen against the US dollar and concerns about Japanese companies' profits.

By the close, the Nikkei Average, which consists of 225 stocks, fell 251.51 points, or 0.68%, from Thursday to close at 36,581.76 points. The broader TSE index fell 21.36 points, or 0.82%, to close at 2,571.14 points. #日本市场 #

In the primary market, stocks of rubber products, transportation equipment and pharmaceuticals led the decline.

The US dollar once fell to about 140.60 against the yen, the strongest level since the end of December last year due to market expectations that the Federal Reserve might cut interest rates sharply during the two-day policy meeting next week.

In terms of individual stocks, Toyota fell 2.3% and TDK fell 1.7%. The 10-year Japanese Treasury yield fell 2.0 basis points to 0.840%.

The stock market opened lower and remained weak throughout the day. At one point, the Nikkei index fell nearly 400 points, as the appreciation of the yen hit the stocks of automakers and the electronics industry. However, due to the buyback of some chip-related stocks, the decline narrowed somewhat.

Koichi Fujishiro, a senior economist at the Dai-ichi Life Economics Research Institute, said investors are wary of the risk of a further appreciation of the yen next week, which could affect the profit prospects of major Japanese companies.

“If USD/JPY falls below 140, then companies may face a greater risk of lowering earnings forecasts for the current fiscal year,” Fujishiro added.

Many Japanese companies assume an average exchange rate of about 145 yen for the US dollar when forecasting profits for the current fiscal year.

The Bank of Japan will announce its policy decision next Friday. Previously, the Federal Reserve was expected to cut interest rates in the middle of the week. Recent comments from some Bank of Japan board members suggest that although the policy interest rate was raised to 0.25% in July, Japan may still raise interest rates in the future.

If the Bank of Japan does not rule out the possibility of raising interest rates by another 25 basis points during the year next week, the yen is expected to be boosted because pricing lags behind in the swap market, and only 32% is likely to be priced as a further rate hike.

Jane Foley, head of foreign exchange strategy at ABN AMRO, said, “Assuming the Bank of Japan does not rule out the possibility of raising interest rates again before the end of the year next week, we expect USD/JPY to continue moving in the direction of 140 within 3-6 months.”

Other strategists expect a further decline in USD/JPY by the end of the year, which may even hit 135.