Tokyo stocks slip as oil prices drop

Overnight falls in the price of oil hit Japanese resource stocks on Friday, but heavy oil users failed to rally, leaving the market down overall.

The Nikkei 225 was 0.5 per cent lower at 16,091.73. The broader Topix also fell 0.5 per cent to 1,573.54.

Inpex, Japan’s biggest upstream oil company, slumped 3.5 per cent to Y934,000 after a sharp drop in US crude futures prices. The slide also hit Japan’s trading houses, with Mitsui down 3.8 per cent to Y1,520.

But the air transport sector, a large proportion of whose expenses are fuel-related, nevertheless fell 0.9 per cent. Japan Airlines, Asia’s biggest carrier, was 1.4 per cent lower at Y217.

The banking sector fell 1.1 per cent, with Mizuho Financial, Japan’s second biggest bank, down 0.8 per cent to Y849,000.

Banking shares were hit by Bank of Japan governor Toshihiko Fukui’s decision on Thursday to avoid hawkish comments about interest rate increases. Although banking shares usually gain from lower interest rates, in Japan’s case many analysts think they will gain when interest rates rise, since the rate at which they can lend to customers may rise faster than the rate of interest they pay for deposits.

Chip equipment stocks jumped after the Semiconductor Equipment Association of Japan reported higher global demand for chip equipment. Tokyo Electron jumped 2.8 per cent to Y8,930.

But Sumitomo Realty & Development, Japan’s third biggest property company, plunged 3.4 per cent to Y3,410 on profit-taking, despite announcing an 83 per cent rise in its consolidated recurring profit and raising its consolidated recurring profit for the year to March 2007.

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