Japanese shares tread water as investors weigh yen surge, BOJ hike

TOKYO: Japanese shares treaded water on Tuesday as investors weighed upbeat domestic data against a stronger yen and growing expectations of a Bank of Japan interest rate hike next week.

The benchmark Nikkei 225 advanced 0.31% to 66,608.42 in early trading.

The broader Topix slipped 0.51% to 4,104.89.

Trading cues were scarce with US markets closed for a holiday on Monday, refocusing attention on domestic data.

Revised figures on Tuesday showed Japan’s second-quarter gross domestic product expanded faster than the initial reading.

A separate release showed real wages rose 2.4% in July from a year earlier, the biggest increase since May 2021. Markets are pricing a near certainty Japan’s central bank will raise its key rate to 1.25% next week.

The yen continued its climb, reaching 153.37 per dollar, the strongest since February.

“Given growing speculation regarding a Bank of Japan interest rate rise at its meeting next week, we anticipate today’s trading will be rather subdued,” said Maki Sawada, an equities strategist at Nomura Securities.

“This appreciation of the yen is also weighing on the market.”

Oil and coal product shares led gains among Topix industry groups, rising 1.54%, while sectors tracking transportation equipment and rubber makers lagged, down 2.51% and 2%, respectively. Breadth was negative on the Nikkei, with 57 advancers against 163 decliners and 5 unchanged.

The largest losers were Taiyo Yuden, down 4.90%, followed by Mercari, down 4.77%, and JTEKT, down 4.66%.

The index’s largest percentage gainers were SoftBank Group, up 6.24%, followed by Nitori Holdings, up 4.54%, and Denka, up 2.65%.