Nikkei Wavers as Yen Strength and BOJ Hike Bets Offset Strong GDP
Japanese shares were mixed Tuesday as strong GDP and wage data were offset by a surging yen and expectations of a BOJ rate hike next week.
Japanese equities showed little directional conviction on Tuesday, with investors balancing encouraging domestic economic data against a strengthening yen and firm expectations of a Bank of Japan (BOJ) rate increase.
The benchmark Nikkei 225 managed a modest gain of 0.31% in early trade, reaching 66,608.42, while the broader Topix index slipped 0.51% to 4,104.89. Trading volumes were thin, with US markets closed for a holiday on Monday, leaving domestic cues to drive sentiment.
Revised official figures released Tuesday showed Japan's second-quarter gross domestic product expanded at a faster clip than initially estimated. Adding to the positive picture, a separate report indicated that real wages rose 2.4% in July from a year earlier — the sharpest increase since May 2021.
However, these upbeat signals were tempered by currency and monetary policy dynamics. Markets are now pricing in a near-certainty that the central bank will lift its key interest rate to 1.25% at its meeting next week. The yen continued its upward march, touching 153.37 per dollar, its strongest level since February.
"Given growing speculation regarding a Bank of Japan interest rate rise at its meeting next week, we anticipate today's trading will be rather subdued," said Maki Sawada, an equities strategist at Nomura Securities. "This appreciation of the yen is also weighing on the market."
Sector performance was mixed. Oil and coal product shares led gains among Topix industry groups, rising 1.54%, while transportation equipment and rubber makers lagged, falling 2.51% and 2%, respectively.
Market breadth was negative on the Nikkei, with 57 advancers against 163 decliners and 5 unchanged. Among the biggest losers were Taiyo Yuden, down 4.90%, followed by Mercari, down 4.77%, and JTEKT, down 4.66%. On the upside, SoftBank Group gained 6.24%, Nitori Holdings rose 4.54%, and Denka advanced 2.65%.