Tokyo shares slump as yen rally hits sentiment

Tokyo shares slumped for a second session in thin trading on Tuesday after a sharp rally in the yen and disappointing Japanese second-quarter GDP figures hit investor sentiment.

The yen’s rise — a negative for exporters’ overseas profitability — came on top of below-par data Monday showing growth in the world’s number three economy was flat during the April-June period.

The figures missed economists’ expectations for a modest 0.2 percent expansion, as weak exports and a fall in business spending held back activity.

Trading was also thin with many investors away for Japan’s week-long Obon holiday.

On currency markets, the dollar fell to 100.17 yen from 101.25 yen in New York, its lowest in about a month.

“The yen is being driven by the dollar’s weakness, spurred on by increasing expectations the Federal Reserve won’t raise (interest) rates this year,” Nicholas Teo, a Singapore-based strategist at KGI Fraser Securities, told Bloomberg News.

“This complicates things for Japanese policy makers seeking to stimulate Japan’s economy.”

By the close, the benchmark Nikkei 225 index was down 1.62 percent, or 273.05 points, to 16,596.51, coming off its highest levels since early June.

The broader Topix index of all first-section shares lost 1.38 percent, or 18.16 points, to end at 1,298.47.

Shares of Uniqlo-operator Fast Retailing, a market heavyweight, dropped 3.00 percent to 36,500 yen.

Toyota fell 1.26 percent to 5,875 yen, rival Nissan shed 1.73 percent to 980.7 yen and videogame giant Nintendo slipped 1.56 percent to 21,720 yen.

An overnight jump in crude prices lifted refiner JX Holdings 1.07 percent to 377.2 yen, while Showa Shell was up 0.93 percent at 868 yen.

An early rally in Inpex shares, which were up more than two percent by the break, fizzled, with the energy explorer closing down 1.02 percent at 837.5 yen.