Tokyo market: Banks may retreat as bonds go up

JAPANESE stocks may be mixed after falling for five straight days. Banks may retreat, concerned that rising bond yields will erode the value of their investment portfolios. This will give institutional shareholders another incentive to sell before closing their books next month. Pensions with money to spend may seek safety in recession-resistant industries such as pharmaceuticals and food processing.

"What's frightened people is that we're getting close to the end of the fiscal year with two possible negatives: earnings [warnings] and selling by institutional investors," said Christophe Aurand, manager at Taiyo Life Gamma Asset Management.

The Nikkei index may trade this week between 13,500 and 14,300. The benchmark last week fell 4.1 per cent to 13,898.09. The Topix banks index fell 5.4 per cent last week, and lenders like Bank of Tokyo-Mitsubishi may fall further on the concern that rising yields on government bonds will cut deeper into the value of investment portfolios already undermined by a weak stock market.

The yield on the benchmark Japanese government bond last week hit a high of 2.44 per cent on signs that the central bank may underwrite more bond sales. The prospect of yields setting new records may give another reason to sell to life insurance companies and other institutions, which are under pressure to raise cash before the end of March.

"Banks are very vulnerable," said Yosuke Mitsusada, a fund manager at NCG Investment Trust Management. "They're looking at latent losses on their bond portfolios, and cross-shareholding ties are going to unwind faster the closer we get to the end of the [fiscal] year."

Still, Mitsusada and others say they expect buying by company and government pensions to keep the benchmark from falling below 13,500. With the bond and currency markets sending discouraging signals for the earnings prospects of banks and exporters, pensions may buy stock in companies like Takeda Chemical Industries, Japan's largest drug maker.

Electronics companies and other exporters will have to battle the yen. A further rise in bond yields is likely to push the Japanese currency still higher against the dollar. Hitachi announced that it will post its first ever full-year group loss because the dollar has bought an average of Y118 during the second half of the year, Y7 less than the company expected.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee