By Kenan Machado
Tokyo shares fell sharply on concerns the Bank of Japan won’t deliver on sky-high easing expectations, on an otherwise positive trading day for the region.
The Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK +0.18% ended down 1.4% and the yen /zigman2/quotes/210561789/realtime/sampled USDJPY -0.1014% strengthened sharply, surging 1.6% against the U.S. dollar in Asian trade — its biggest one-day appreciation since the Brexit vote.
A report published Tuesday by the Nikkei business daily said the Japanese government will inject ¥6 trillion ($56.70 billion) in direct spending, twice the previous estimate — but that the spending will be spread over several years, muffling the impact. That disappointed traders.
“[Japanese] fiscal stimulus looks less bold, and we aren’t sure if [Bank of Japan Gov. Haruhiko] Kuroda will ease further. It’s difficult to buy more from here,” said Tomoichiro Kubota, a senior market analyst at Matsui Securities.
Elsewhere in the region, Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -0.52% rose 0.1%, Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -0.48% 0.8% and the Shanghai Composite Index /zigman2/quotes/210598127/delayed CN:SHCOMP -1.32% 1.1%. South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -0.83% ended with a 0.8% gain following news that the South Korean economy grew at a faster-than-expected pace in the second quarter.
Japan’s stock market has attracted strong inflows since a July 10 election win for Prime Minister Shinzo Abe’s ruling coalition encouraged expectations of a massive stimulus package to jumpstart the economy—but those hopes may be fading.
“There could be some disappointment on the amount (of the stimulus),” said Joanne Goh, regional equity strategist at DBS Bank in Singapore. “The markets were expecting at least ¥10 trillion in fiscal stimulus itself,” she said. The BOJ will announce its decision on easing Friday, when further details of a government stimulus package could also emerge.
Among major Japanese stocks, export bellwether Canon /zigman2/quotes/207639533/delayed JP:7751 -1.57% fell 2.8% while Nintendo /zigman2/quotes/208063194/delayed JP:7974 -1.15% /zigman2/quotes/201616881/delayed NTDOY -0.83% recouped some of its earlier losses to finish 1.6% higher.
With Tokyo stocks declining and the yen strengthening, investors poured money into government debt. Yields on the benchmark 10-year Japanese Government Bond fell 0.010 percentage point to minus 0.255% late Tuesday. Yields move inversely with bond prices.
“Any measure by the Bank of Japan needs to be significantly ahead of what is rumored right now,” said Douglas Morton, head of research for Asia at Northern Trust Securities. Risks for a negative surprise run high, he said.
Hiroyuki Kachi, Kosaku Narioka and Jasper Moiseiwitsch contributed to this article.