Nikkei index down over 2% on US monetary tightening fears

TOKYO (Kyodo) — Tokyo stocks plunged Monday morning, with the Nikkei index briefly falling over 2 percent, on fears that the US central bank will accelerate its monetary tightening to tame soaring inflation.

The 225-issue Nikkei Stock Average fell 526.56 points, or 1.94 percent, from Friday to 26,578.70. The broader Topix index was down 30.02 points, or 1.58 percent, at 1,875.13.

Every industry category on the top-tier Prime Market lost ground, except for farm and fishery issues. Decliners were led by mining and air transportation issues.

The US dollar remained firm mostly in the mid-128 yen level in the morning, with the unit bought as differences in monetary policy between the US Federal Reserve and the Bank of Japan, which has stuck with powerful monetary easing, become starker, dealers said .

At noon, the dollar fetched 128.32-33 yen compared with 128.45-55 yen in New York and 128.05-08 yen in Tokyo at 5 pm Friday.

The euro was quoted at $1.0779-0783 and 138.32-38 yen against $1.0804-0814 and 138.81-91 yen in New York and $1.0806-0808 and 138.39-43 yen in Tokyo late Friday afternoon.

The Nikkei sank below the 27,000 mark from the opening, briefly plummet over 600 points, after the Dow Jones and the technology-heavy Nasdaq index both fell over 2 percent on Friday.

The plunge came on concerns over the US economy after Fed Chairman Jerome Powell on Thursday in Washington touched on the possibility of a 50 basis point interest rate hike in May from the usual 25 basis point increase.

“The Fed signaled its position to aggressively tighten monetary policy, indicating a need to take emergency measures if soaring inflation continues,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co.

The US central bank decided last month to raise key interest rates for the first time since 2018 and signaled several more hikes this year to tame high inflation. Interest rate hikes lead to higher borrowing costs for companies and households.

Commodity and energy prices are likely to stay elevated as the Ukraine crisis shows no signs of ending, and may lead to an additional fall in stocks, he added.

Meanwhile, Emmanuel Macron’s victory against Marine Le Pen in the French presidential election Sunday had limited impact on Tokyo stocks, although it provided reassurance about political stability in Europe, Fujito said.

Among Prime Market issues, declining issues outnumbered advancers 1,599 to 197, while 42 ended the morning unchanged.

ANA Holdings sank 98.5 yen, or 3.9 percent, to 2,396.5 yen, after the airline operator revised downward Friday its earnings forecast for the business year ending March 2022 as the coronavirus pandemic reduced travel demand.

Nissan Motor dropped 21.4 yen, or 4.0 percent, to 515.5 yen, following a news report Friday that Renault SA, the Japanese automaker’s key alliance partner and top shareholder, was considering selling part of its stake in Nissan to fund research and development in electronic vehicles .

Energy-related issues were particularly lower following a fall in crude oil futures during New York trading late last week, with Inpex falling 56 yen, or 3.5 percent, to 1,529 yen, while Japan Petroleum Exploration declined 43 yen, or 1.7 percent, to 2,510 yen.