Tokyo: Stocks plunge in early trade on stronger yen

[TOKYO] Tokyo stocks plunged in early trade on Wednesday as a sharply stronger yen hit exporters, while traders nervously eyed record low yields on government bonds.

The Japanese market opened in the red with bond yields showing weakness never before seen and a pick up in the yen signalling that investors are worried about uncertainty in Europe following Britain's vote to leave the European Union.

There is anxiety over the impact of apprehension in Europe and Britain on the global economy, said Mitsuo Shimizu, deputy general manager with Japan Asia Securities Group.

"The UK's economic outlook is blurred with uncertainty," Mr Shimizu told Bloomberg News.

"The pound's recent weakness is likely to encourage speculative buying in the yen," he said.

About 40 minutes after the opening bell, Tokyo's Nikkei 225 index shed 2.19 per cent, or 342.76 points, to 15,326.57.

The Nikkei 225 posted its first loss following six straight days of gains on Tuesday after rallying on hopes Japanese officials will launch fresh stimulus to counter the impact of Brexit.

The broader Topix index of all first-section shares lost 2.14 per cent, or 26.87 points, to 1,229.77.

Bank shares took a steep hit Wednesday after a warning from the European Central Bank that Italy's number-three Banca Monte dei Paschi di Siena, the world's oldest bank, had dangerously high levels of bad debt.

In the first hour of trade, Japanese banking giant Mitsubishi UFJ Financial Group and rival Sumitomo Mitsui Financial Group tumbled more than three percent and more than two per cent, respectively.

The stronger yen hit the outlook for exporters' profitability. The dollar slipped to 101.24 yen from 101.75 yen in New York and 102.12 Tuesday in Tokyo.

Automakers suffered, with Toyota and Nissan both shedding nearly three per cent and Honda Motor 4.5 per cent off.

On debt markets, the yield on Japan's 20-year government bond touched zero for the first time, with other maturities also falling to new lows, according to Bloomberg News.

AFP