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Updated December 21st, 2023 at 08:25 IST

Nikkei plunges in response to Wall Street's decline; Toyota shares nosedive

The Nikkei sagged 1.68% to 33,110.45 as of 02:17 GMT, with 198 of its 225 components witnessing declines, 26 registering gains, and one remaining unchanged.

Nikkei
Nikkei | Image:Nikkei
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Japan's Nikkei share average on Thursday declined, echoing the sharp sell-off in Wall Street the previous night. The index slipped from its recent historical highs, with automaker Toyota's shares particularly affected by a widening safety inspection scandal at its subsidiary, Daihatsu Motor.

The Nikkei sagged 1.68 per cent to 33,110.45 as of 02:17 GMT, with 198 of its 225 components witnessing declines, 26 registering gains, and one remaining unchanged. 

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The broader Topix also dropped 1.16 per cent.

The previous day, the Nikkei had reached 33,824.06, approaching the 33-year peak of 33,853.46 seen last month, after the Bank of Japan maintained a dovish stance, disappointing traders anticipating signals of a potential near-term exit from stimulus measures.

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Japanese equities had been buoyed by the rally in US stocks that saw record highs for the Dow and Nasdaq earlier in the week. This was fuelled by expectations of an imminent interest rate cut by the Federal Reserve and confidence in a soft landing for the economy.

Sumitomo Mitsui DS Asset Management's chief macro strategist, Masayuki Kichikawa, attributed the Nikkei's decline to a reaction to the previous night's events in US equity markets. He noted that the record-setting rally on Wall Street seemed “overextended.”

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Despite the recent setback, Kichikawa expressed optimism, citing evidence for a US soft landing and signs of robustness in Japan's own economy. He suggested that there could be more upside than downside for Japanese equities for the remainder of the year.

The decline in Toyota's shares was notable, falling as much as 5.6 per cent and ending 4 per cent lower after its small car-making unit announced a suspension of all vehicle shipments. This decision followed an independent panel's finding that collision tests had been manipulated. 

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Toyota's slump had a domino effect, dragging down the transport equipment sector, making it the worst-performing among the Tokyo Stock Exchange's 33 industry groups.

Semiconductor-related stocks also underperformed, mirroring their US counterparts.

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Renesas Electronics, a chipmaker, experienced the most significant decline on the Nikkei, down 5.33 per cent, while chip-testing equipment manufacturer Advantest slid 3.45 per cent.

(With Reuters Inputs)

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Published December 21st, 2023 at 08:25 IST

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