Japan’s Nikkei declines following Fed decision

The Japanese Nikkei stock index concluded a three-day winning streak on Thursday, December 14, with declines in auto and bank stocks following the US Federal Reserve’s signal of an end to the monetary policy tightening cycle.

The US Federal Reserve’s decision strengthened the yen and led to a significant drop in US Treasury bond yields. Consequently, the Nikkei index closed down 0.73% at 32,686.25 points after initially rising by 0.6% in the session. The Dow Jones Industrial Average reached its first record high closing level since January 2022, following the US Central Bank’s announcement that the interest rate hike policy had come to an end.

The Japanese yen achieved its highest level in four and a half months against the dollar, while benchmark US 10-year bond yields continued to decline in Asian trading hours, reaching their lowest level since August.

A stronger yen tends to negatively impact exporters’ stocks, as it reduces the value of overseas profits in yen when repatriated to Japan.

The broader Topix index fell 1.43% to 2,321.35, with the automobile and spare parts sector experiencing a 3.98% decline, marking the largest daily drop since October 4. This sector became the worst-performing among the 33 sub-indices on the Tokyo Stock Exchange. Toyota Motor shares lost 3.82%, Honda Motor shares fell 5%, and the banking sector experienced a 3.82% decline, with Mitsubishi UFJ Financial and Sumitomo Mitsui Financial Group shares falling 3.54% and 5.25%, respectively.