Tokyo stocks open lower as yen strengthens

Tokyo stocks opened lower on Thursday as the yen hit a four-month high after the US treasury secretary hailed a “weak dollar” at the World Economic Forum in Davos.

The benchmark Nikkei 225 index lost 0.78 percent or 185.64 points to 23,755.14 in early trade while the broader Topix index was down 0.74 percent or 13.99 points at 1,887.24.

US Treasury Secretary Steven Mnuchin said Wednesday that a “weaker dollar” was good for the United States, words that sharply lowered the value of US currency on the markets.

“Obviously a weaker dollar is good for us, it’s good because it has to do with trade and opportunities,” the top economic official said.

Already weak since Tuesday, when US President Donald Trump signed fresh protectionist measures against China and South Korea, the dollar lost even more ground after Mnuchin’s comments.

In Asia, the dollar fetched 109.31 yen, slightly up from 109.24 yen in New York after Mnuchin spoke, but still down from 109.87 yen in Tokyo late Wednesday.

The comments were widely interpreted as a green light from Washington to let the value of the dollar slide to make US exports cheaper.

In a normal scenario “the yen should get cheaper as the US Fed keeps hiking its key rates while the Bank of Japan is maintaining its monetary easing”, Masayuki Kubota, chief strategist at Rakuten Securities, said in a commentary.

“However, if US President Trump makes comments criticising a cheaper yen, the yen’s depreciation may halt,” said Kubota, noting that currency exchange rates have been affected frequently by political factors including Trump’s comments.

A strong yen erodes exporters’ profits when repatriated and often drags down the Tokyo stock markets. In early Thursday trade, major exporters were broadly lower.

Toyota fell 1.58 percent to 7,552 yen, Sony dropped 3.47 percent to 5,253 yen and Nintendo lost 1.56 percent to 47,880 yen.

Banks were also lower after the Bank of Japan this week kept its super-loose monetary policy in place, tamping down investor expectations of a move towards an exit from the stimulus.

Mitsubishi UFJ was down 1.67 percent at 853.6 yen and its rival Sumitomo Mitsui Financial was down 1.11 percent at 5,150 yen.

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