Tokyo shares tumble as yen surges on Brexit fears
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TOKYO - Tokyo stocks tumbled Wednesday as fresh worries about Britain's vote to leave the European Union sparked a rally in the yen that dented exporters including auto giant Toyota and rival Honda.
Japanese shares followed global markets into negative territory as the Bank of England Tuesday warned over the possible damage to global growth from Brexit.
In its biannual report the central bank highlighted a number of risks emanating from the vote to leave the EU, including a hit to commercial real estate from the possible relocation of banking jobs to other European cities.
In response, bond yields tumbled in a drop that underscored investors were willing to sacrifice earnings to keep their money in rock-solid government debt.
On Wednesday, the yield on Japanese 20-year government bonds dipped below zero for the first time, while other maturities also fell to new lows.
The fresh Brexit concerns also set off a sharp rally in the yen, which is seen as a safe investment in times of turmoil.
A stronger yen is bad for Japanese exporters' profitability, however, and hurts demand for their shares.
At the close, the benchmark Nikkei 225 index was 1.85 per cent, or 290.34 points, lower at 15,378.99 yen, after tumbling more than three per cent in late morning trade.
The broader Topix index fell 1.79 per cent, or 22.44 points, to finish at 1,234.20.
On forex markets, the dollar slumped as low as 100.75 yen from 101.75 yen in New York late Tuesday and its lowest since a day after Britain voted on June 23 to give up its EU membership.
"The UK's economic outlook is blurred with uncertainty," Mitsuo Shimizu, deputy general manager with Japan Asia Securities Group, told Bloomberg News.
Adding to the sense of panic was news that three commercial property funds worth billions of dollars had suspended trade and blocked client redemptions.
The moves come as fears grow that the vote will lead companies -- particularly banks in London -- to shift operations from Britain.
Brexit could have significant consequences for more than 1,000 Japanese firms that operate in the UK -- many of which see it as a staging point for dealing in Europe.
Automakers were also among the losers, with Honda's shares nosediving 4.54 per cent to 2,465.5 yen and Toyota falling 1.72 per cent to 5,064.0 yen.
Uniqlo operator Fast Retailing, a market heavyweight, lost 2.41 per cent to end at 25,900.0 yen.
Sinking oil prices hit some crude-linked shares with refiner JX Holdings down 3.21 per cent at 385.2 yen.
Japanese bank shares were hammered after a warning from the European Central Bank that Italy's number-three Banca Monte dei Paschi di Siena, the world's oldest lender, had dangerously high levels of bad debt, hitting already shaky sentiment.
Mitsubishi UFJ Financial Group dropped 3.60 per cent to close at 433.8 yen, while Sumitomo Mitsui Financial Group fell 2.37 per cent to 2,819.0 yen.
- AFP
