TOKYO – Japan’s financial markets saw turbulence Monday, the first trading day of 2020, with Tokyo stocks plunging and the yen climbing against the U.S. dollar in the wake of escalating tensions in the Middle East.
The 225-issue Nikkei Stock Average ended down 451.76 points, or 1.91 percent, from Dec. 30 at 23,204.86, its lowest close since Dec. 4. Tokyo markets had been closed since Tuesday for the New Year holidays. The broader Topix index of all First Section issues on the Tokyo Stock Exchange finished 23.87 points, or 1.39 percent, lower at 1,697.49.
The dollar briefly slid to a three-month low in the upper 107 yen level, while bonds and gold were in demand as investors fled to safe-haven assets in an attempt to reduce their risk exposure on concerns over heightening geopolitical tensions.
The Nikkei dropped more than 500 points at one point tracking weak U.S. shares after a U.S. airstrike killed top Iranian commander Qasem Soleimani on Friday, leading Iran to vow retaliation.
U.S. President Donald Trump on Sunday said on Twitter that “should Iran strike any U.S. person or target, the United States will quickly & fully strike back, & perhaps in a disproportionate manner.”
“Concerns grew that U.S.-Iran tensions will escalate further,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “The market became aware of the geopolitical risk in the region again,” He added.
Brokers projected the declining trend would last for a while, believing that few domestic investors would buy Tokyo shares as a sense of undervaluation has disappeared following their rally late last year.
The dollar briefly slid to around 107.80 yen in the morning, a level not seen since early October, before fluctuating around the 108 yen line in the afternoon. The yen’s firmness stoked worries over Japanese corporate profits, brokers said.
Other safe-haven assets including gold and bonds were also in demand. Gold futures jumped to a record high at the Tokyo Commodity Exchange and the yield on the benchmark Japanese 10-year government debt fell further into negative territory.
Worries about U.S.-Iran tensions lifted oil prices in Tokyo, with Middle East crude oil futures spiking to a seven-month high at the commodity exchange.
On the First Section, declining issues outnumbered advancers 1,835 to 277, while 49 ended unchanged. Decliners included marine transportation, transportation equipment, and air transportation issues.
Marine transportation issues took a hit after concerns over renewed U.S.-Iran tensions pushed up crude oil prices.
Mitsui O.S.K. Lines tumbled 127 yen, or 4.2 percent, to 2,898 yen, Kawasaki Kisen slumped 76 yen, or 4.1 percent, to 1,787 yen while Nippon Yusen slid 57 yen, or 2.9 percent, to 1,924 yen.
On the other hand, oil refiners and explorers attracted buying on hopes that higher fuel prices would increase their profits. Inpex soared 46.50 yen, or 4.1 percent, to 1,183.00 yen, JXTG Holdings jumped 17.00 yen, or 3.4 percent, to 514.90 yen and Idemitsu Kosan was up 75 yen, or 2.5 percent, at 3,105 yen.
Automakers struggled due to a stronger yen. Honda Motor plunged 92 yen, or 3.0 percent, to 3,007 yen, Mazda Motor lost 23 yen, or 2.5 percent, to 915 yen and Toyota Motor was down 149 yen, or 1.9 percent, at 7,565 yen.
Mitsubishi UFJ Financial Group declined 11.10 yen, or 1.9 percent, to 582.10 yen after saying last week it expects to book a special loss of over 200 billion yen ($1.9 billion) stemming from an impairment stock loss at its banking unit in Indonesia.
Trading volume on the main section rose to 1,219.71 million shares from 796.62 million shares on Dec. 30.