SINGAPORE/TOKYO: Japan’s Nikkei share average marked its worst week in nearly three months on Friday, while the benchmark ended flat for the day, pulled down by concerns over aggressive interest rate hikes globally, with a weaker yen providing only a smidgen of comfort.
The Nikkei ended 0.04% lower at 27,650.84 and posted a 3.4% weekly decline, its worst loss since mid-June.
The broader Topix fell 0.27% to 1,930.17, after touching a six-week low of 1,926.05 earlier in the session.
The index lost 2.5% for this week. Market expectations for US interest rates have crept steadily higher - hurting appetite for stocks - since last week’s speech from Federal Reserve chair Jerome Powell, who reiterated his focus taming inflation above all.
“Many people in the equity markets, including Japan, now think that the upside is very limited, because of that (hawkish) stance of the Federal Reserve,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management in Tokyo.
Technology firms have faced a particular clobbering from the hawkish rate-hike view, making the sector the largest drag on the broader market on Friday.
Gaming company Nexon, which touched a six-month low after reporting quarterly earnings on Thursday, fell 3.06% and was the biggest drag on the Nikkei. Shares of Trend Micro slipped 1.68% and lost more than 7% for the week, as the cybersecurity firm recoiled from a two-decade high scaled last month.
Department store operators J.Front Retailing and Isetan Mitsukoshi rose 2.06% and 1.99%, respectively.
Japan’s Nikkei tracks Wall Street lower, chip shares drag
Focus has shifted to US labour data due later on Friday, which if strong could reinforce expectations that the Fed hikes rates by a steep 75 basis points later in September, and on the currency market where the yen is wallowing at a 24-year low.
“Of course, a weakened yen has been helping the profits of the exporting companies,” said Sumitomo’s Kichikawa.
“But it’s not clear whether the yen weakness is positive for the economy and equity pricing in Japan because at the moment, Japan’s trade balance is in the negative territory.”
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