Saturday, March 4, 2006

CPI data sends Tokyo markets lower

by Brian Turner

Both domestic and export-oriented stocks declined on Friday in Tokyo in response to the release of data showing that consumer prices, and therefore inflation, was stronger than had been forecast in January. The Nikkei 225 lost 1.5 percent to 15,663.34, while the Topix index closed 1.2 percent lower at 1,612.96.

The real estate sector dropped 3.4 percent as a whole, with Mitsui Fudosan declining by 2.6 percent to ¥2,390 and Mitsubishi Estate losing 5.4 percent to ¥2,355.

Real estate is particularly sensitive to the possibility of changes in the Bank of Japan’s zero interest rate policy. Even though many analysts believe that interest rate hikes are still a year or two down the road, any sort of monetary policy tightening such as that expected as early as next week is the first step in the direction of higher interest rates and as such negative for the sector.

The retail sector also saw losses on the day even though some analysts believe that it will benefit from more spending when interest rates go up because Japanese households are net savers. As such, higher interest rates will send their incomes up. Department store chain Isetan lost 0.7 percent on the day to ¥2,065.

The automobile sector declined on the fear that changes in monetary policy will cause the yen to rise. Honda lost 1.8 percent to ¥6,730.

 

 

 

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