Crumbling rate expectations dampen shares

Japanese shares ended mildly up on the day on Wednesday, following a sudden retreat from expectations of an interest rate rise this week.

The Nikkei 225 ended 0.3 per cent higher at 17,261.35. The broader Topix rose 0.2 per cent to 1,706.76.

But although the market rose, the increase was modest, reflecting the complicated relationship between Japanese interest rates and corporate earnings. The Bank of Japan’s interest rate decision is due Thursday.

Shares of property companies, which are highly leveraged, rose sharply. Mitsui Fudosan, Japan’s biggest property company, gained 1.9 per cent to Y2,970. Mitsubishi Estate, its largest rival, climbed 2.9 per cent to Y3,240. Sumitomo Realty & Development rose 2.1 per cent to Y3,830.

Some export stocks rose as the yen responded to the market’s latest interest rate view by dropping to a fresh 13-month low against the dollar of Y120.88. The export-focused machinery sector closed up 1 per cent. Komatsu, the construction equipment maker, climbed 1.5 per cent to Y2,425.

The banking sector declined 1.1 per cent, reflecting the view of some analysts that a rise in interest rates would – atypically for an economy - have widened their loan margins. Sumitomo Trust & Banking declined 1.1 per cent to Y1,309. Mitsubishi UFJ, the world’s biggest bank by assets, was unchanged at Y1,530,000.

Some consumer-focused sectors saw only mild rises. Although higher interest rates would have increased their debt costs, they might also have boosted sales since Japanese households are net creditors.

The fall in the yen helped to limit losses among chip-related stocks which fell after US-based Intel, the world’s biggest chipmaker, reported a 40 per cent drop in quarterly profit and predicted margins would not improve. Tokyo Electron declined 0.3 per cent to Y9,270 and Advantest slipped 0.5 per cent to Y6,630.

Shinsei Bank dropped 6.1 per cent to Y706 after cutting its full-year profit forecast by 47 per cent. The bank cited higher provisions for restructuring costs and possible legal claims against Aplus, its consumer finance unit. Aplus plummeted 112.1 per cent to Y182.

Investors were unimpressed by Tuesday’s line up of new spring mobile models by NTT DoCoMo, Japan’s biggest mobile carrier, including one that gives off seven different scents. The stock declined 0.5 per cent to Y190,000.

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