Tokyo stocks snapped a four-day winning streak Friday as investors cashed in on recent gains with worries over North Korea returning to the trading floor. The market turned increasingly cautious as US President Donald Trump and North Korean leader Kim Jong-Un traded blistering barbs, with Pyongyang's foreign minister hinting at the possibility of a hydrogen bomb test over the Pacific Ocean.
The Nikkei 225 index lost 0.25 percent, or 51.03 points, to close at 20,296.45, but marked a weekly gain of 1.94 percent. The broader Topix index also ended down 0.25 percent, or 4.13 points, at 1,664.61, but added 1.57 percent over the past week. "The Nikkei index... slipped into negative territory after reports came that North Korea might carry out a hydrogen bomb test," said Okasan Online Securities in a commentary.
The renewed tension weighed on Tokyo shares related to tourism, such as department stores and cosmetics firms, while defence-related stocks firmed, Okasan added. Travel agency HIS lost 3.30 percent to 3,370 yen. Department store operator Isetan Mitsukoshi Holdings plunged 5.08 percent to 1,120 yen and Shiseido cosmetics maker dropped 4.54 percent to 4,231. However, Mitsubishi Heavy Industries, which builds jets and defence equipment, rebounded to end 0.11 percent higher at 446.1 yen. Its smaller rival IHI Corp added 0.52 percent to 388 yen.
Investors also used the opportunity to lock in profits after the Nikkei's recent gains. "The upside had gotten tough following a four-day gain," Naoki Fujiwara, chief fund manager at Shinkin Asset Management, told Bloomberg News. "There isn't much that could push local equities further up. Like yesterday, a rise in the morning is being followed by a bout of profit-taking," he added.
The Tokyo bourse started Friday's session in positive territory with the dollar staying buoyant against the yen, helping Japanese exporters. But the greenback began to head south when North Korean Foreign Minister Ri Yong-ho told reporters in New York his nation might be preparing "an H-bomb test of an unprecedented level perhaps over the Pacific".
Worried investors dumped the dollar, which slipped to 111.86 yen from 112.49 yen in New York Thursday where expectations for another US rate hike provided support for the US currency. Appreciation of the yen, seen as a safe haven unit at times of uncertainty, generally weighs on Japanese shares, particularly exporters.
Globally, eyes will be on Fed chair Janet Yellen's speech on Tuesday, along with a barrage of key US data, for more clues about prospects for another US rate hike by the year end. Also in the coming week, Prime Minister Shinzo Abe is expected on Monday to officially announce a plan to call a snap election, probably on October 22. Among other major shares, Toyota gave up early gains and ended 0.07 percent lower at 6,733 yen, while Nissan lost 0.52 percent to 1,152 yen. Uniqlo operator Fast Retailing dropped 0.27 percent to 33,080 and Telecom giant SoftBank fell 0.73 percent to 9,080 yen.
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