Japan’s Nikkei Drops Most In Three Months On Concern Over Stability Of U.S. Financial System

Japan’s Nikkei Drops Most In Three Months On Concern Over Stability Of U.S. Financial System

TOKYO, Mar 15 (NNN-NHK) – Japan’s benchmark Nikkei stock index, marked its biggest drop in three months, yesterday, as banking shares were offloaded, amid investor fears of further fallout from the collapse of two major U.S. banks.

The 225-issue Nikkei Stock Average dropped 610.92 points, or 2.19 percent, from Monday, to close the day at 27,222.04, its biggest fall since Dec 20. The broader Topix index, meanwhile, fell 53.45 points, or 2.67 percent, to finish the day at 1,947.54.

Dealers here said that, investors continued to opt out of riskier assets, especially financial-oriented issues, and switch to safer havens, such as gold.

They added that, investors remained extremely concerned about contagion, following the U.S. banks’ collapse, fearing that instability of the U.S. financial system could have a knock-on effect on markets in the Asian region.

“Foreign investors who bought a large number of Japanese shares last week, were selling them to evade risks,” Yutaka Miura, senior technical analyst at Mizuho Securities, was quoted as saying.

Other analysts said, contagion fears had now diminished hopes the Bank of Japan (BOJ) might alter its monetary policy in the near term. “The pressure to unwind positions is extremely big here,” Yunosuke Ikeda, chief equity strategist at Nomura Securities, was quoted as saying.

Comments from government officials earlier yesterday, aimed at calming the market mood, had little effect, market strategists here said, with major banks and regional lenders tanking.

Japanese Economy Minister, Shigeyuki Goto, told a regular news conference, the government was keenly eyeing developments and any adverse effects on Japan’s economy, but said in the short-term, the impact from the collapse of U.S. lender Silicon Valley Bank was not likely to be major.

Finance Minister, Shunichi Suzuki, largely reiterated this view, saying separately that, he was confident in Japan’s banking system weathering the storm, as they have enough strong capital bases and liquidity.

“At this point, we think the possibility of the recent collapse of the U.S. banks leaving a serious impact on the stability of the Japanese financial system is low. The financial system is relatively stable,” Suzuki told a press briefing on the matter.

“The Financial Services Agency will need to closely watch economic and financial market developments, both at home and abroad, and monitor how Japanese financial institutions will be impacted,” Suzuki said at the presser, following a Cabinet Meeting.

The demise of Silicon Valley Bank, the second-largest bank to collapse in U.S. history, with its failure only topped by Washington Mutual being wiped-out in 2008, during the global financial crisis, triggered New York-based Signature Bank to be closed and taken over by state regulators, marking the third largest banking failure in U.S. history, market watchers here highlighted, with Japanese government officials’ remarks doing little to bolster confidence in the banking sector.

Banking issues taking the biggest hit yesterday included, Mitsubishi UFJ Financial Group, tumbling 8.6 percent, while Sumitomo Mitsui Financial Group fell 7.6 percent.

Fellow megabank, Mizuho Financial Group, meanwhile, ended the day 7.1 percent lower.

Among regional banks, First Bank of Toyama booked an almost 12 percent decline.

With the yen strengthening against the U.S. dollar, as the market now expects the U.S. Federal Reserve to apply the brakes to its interest rate hikes, domestic exporters reliant on a weaker yen to boost overseas profits, declined.

Among exporters losing the most, automakers reversed, with Toyota down almost three percent, while Mitsubishi Motors, Mazda and Nissan all skidded down more than five percent.

By the close of play, bank, insurance and mining shares comprised those that declined the most.

The turnover on the second trading day of the week came to 3,904.11 billion yen (29.09 billion U.S. dollars).


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