Tokyo stocks open lower after BoJ underwhelms

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Pedestrians are reflected in an electronic board displaying various stock prices at a brokerage in Tokyo, Japan, February 4, 2016. REUTERS/Yuya Shino

Tokyo stocks opened sharply lower Monday as the yen soared on weak US growth data and after the Bank of Japan disappointed markets with underwhelming tweaks to its stimulus programme.

On Wall Street, US equities ended mostly in the black on Friday following strong earnings from major technology companies, despite weaker-than-expected quarterly growth figures from the world’s top economy.

Official US data estimated second quarter growth at an annual rate of 1.2 percent, far below the 2.6 percent anticipated by analysts.

In forex markets, the soft GDP figures on Friday sent the dollar tumbling against Japan’s currency, which is seen as a perceived safe-haven in times of uncertainty.

But a strong yen is a minus for Japan’s exporters, as it dents their overseas profits. That, in turn, weighs on demand for their shares.

“The stronger yen will weigh on Japanese stocks,” Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Center, told Bloomberg News.

“It’s negative for exporters’ earnings.”

The greenback rose to 102.48 from 102.07 yen in New York, but was still down sharply from 103.58 yen in Tokyo earlier on Friday.

In opening deals, the benchmark Nikkei 225 index index slipped 0.93 percent, or 153.96 points, to 16,415.31, following a small gain on Friday.

The broader Topix index of all first-section shares lost 1.09 percent, or 14.44 points, to 1,308.30.

The BoJ deflated investor spirits after it held off from expanding a massive bond-buying programme — a cornerstone of its years-long battle against deflation.

Japanese officials are under pressure as the fate of Prime Minister Shinzo Abe‘s bid to reignite the world’s number three economy, dubbed Abenomics, looks increasingly gloomy.

The Japanese central bank’s plan is to double purchases of exchange-traded funds to about six trillion yen annually, and inflate a US dollar lending programme for Japanese firms doing business overseas.

But the central bank opted to leave its 80 trillion yen annual bond-buying programme unchanged and also held off cutting interest rates deeper into negative territory.

On Wall Street Friday, the broad-based S&P 500 and tech-rich Nasdaq both ended slightly higher, rising 0.2 and 0.1 percent, respectively, following robust earnings from tech giants Amazon and Google parent Alphabet. But the Dow finished 0.1 percent lower.