Japanese Market Sharply Lower

Adding to the losses in the previous two sessions, the Japanese stock market is sharply lower for a third straight session on Friday, despite the broadly positive cues from Wall Street overnight. The benchmark Nikkei 225 is falling a tad below the 32,300 level, with traders reacting to a raft of domestic economic data, including third quarter GDP that shrank.

The expectations that Bank of Japan will exit from decades of ultra-loose policies in 2024 also weighed on the market. Comments from Bank of Japan governor Kazuo Ueda suggested the central bank will end its negative interest-rate policy soon.

The benchmark Nikkei 225 Index is losing 560.89 points or 1.71 percent to 32,297.42, after hitting a low of 32,287.05 earlier. Japanese stocks closed sharply lower on Thursday.

Market heavyweight SoftBank Group is edging down 0.5 percent and Uniqlo operator Fast Retailing is losing almost 3 percent. Among automakers, Honda is losing more than 2 percent and Toyota is declining almost 5 percent.

In the tech space, Advantest is gaining almost 1 percent and Screen Holdings is adding more than 2 percent, while Tokyo Electron is edging down 0.5 percent.

In the banking sector, Mitsubishi UFJ Financial is gaining almost 2 percent, Sumitomo Mitsui Financial is adding more than 1 percent and Mizuho Financial is up almost 1 percent.

Among major exporters, Mitsubishi Electric and Canon are losing almost 2 percent each, while Sony is down more than 1 percent and Panasonic is declining almost 1 percent.

Among other major losers, JTEKT, Subaru and Toyota Tsusho are gaining more than 5 percent each, while Alps Alpine and Ricoh are adding almost 4 percent each. Toppan Holdings, Amada, Mitsubishi Motors, Kawasaki Kisen Kaisha, Konica Minolta and Denso are advancing more than 4 percent each, while Mazda Motor, Yokohama Rubber and Hitachi Construction Machinery are up almost 4 percent each.

Conversely, Nichirei is surging almost 7 percent and LY Corp. is gaining almost 5 percent, while Resona Holdings and Tobu Railway are adding more than 3 percent each. Fukuoka Financial is up almost 3 percent.

In economic news, the average of household spending in Japan was down 2.5 percent on year in October, the Ministry of Internal Affairs and Communications said on Friday, coming in at 301,974 yen. That beat forecasts for a decline of 3.0 percent following the 2.8 percent drop in September. On a monthly basis, household spending eased 0.1 percent, again beating forecasts for -0.2 percent after adding 0.3 percent in the previous month. The average of monthly income per household stood at 559,898 yen, down an annual 5.2 percent.

The Cabinet Office said Japan’s gross domestic product contracted a seasonally adjusted 0.7 percent on quarter in the third quarter of 2023. That missed expectations for a decline of 0.5 percent following the 1.2 percent expansion in the previous three months. On an annualized basis, GDP dropped 2.9 percent – again missing forecasts for a decline of 2.1 percent following the 4.8 percent gain in the three months prior.

The Ministry of Finance said Japan posted a current account surplus of 2.583 trillion yen in October, down from 2.724 trillion in September. Exports were up 1.0 percent on year at 9.107 trillion yen, while imports sank an annual 12.1 percent to 9.579 trillion yen for a trade deficit of 472.8 million yen. The capital account showed a deficit of 18.2 million yen, while the financial account had a surplus of 1.765 trillion yen.

The Bank of Japan said the value of overall bank lending in Japan up 2.8 percent on year in November, coming in at 609.202 trillion yen. That was in line with expectations following the downwardly revised 2.7 percent increase in October (originally 2.8 percent).

In the currency market, the U.S. dollar is trading in the lower 143 yen-range on Friday.

On Wall Street, stocks continued to turn in a strong performance throughout much of the trading day on Thursday after moving mostly higher early in the session. The major averages moved back to the upside following the downturn seen on Wednesday, with the tech-heavy Nasdaq leading the rebound.

The Nasdaq jumped 193.28 points or 1.4 percent to 14,339.99, reaching its best closing level in over four months. The S&P 500 also advanced 36.25 points or 0.8 percent to 4,585.59, while the narrower Dow posted a more modest gain, edging up 62.95 points or 0.2 percent to 36,117.38.

Meanwhile, the major European markets showed more modest moves to the downside on the day. While the U.K.’s FTSE 100 Index closed just below the unchanged line, the French CAC 40 Index edged down by 0.1 percent and the German DAX Index dipped by 0.2 percent.

Crude oil futures settled slightly lower Thursday amid lingering uncertainty about the outlook for energy demand due to global economic slowdown. West Texas Intermediate Crude oil futures for January ended down $0.04 at $69.34 a barrel.

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