Tokyo shares close lower ahead of US Fed’s minutes

Tokyo stocks closed lower on Wednesday, extending Wall Street falls as investors awaited minutes from a US Federal Reserve meeting for clues over future monetary policy, AFP reported.

The benchmark Nikkei 225 index dropped 1.58 percent, or 437.68 points, to end at 27,350.30, while the broader Topix index fell 1.34 percent, or 26.21 points, to 1,922.91.

“The Nikkei index opened lower due to caution over aggressive quantitative tightening of US monetary policy,” Okasan Online Securities said in a note.

“Following falls of US high-tech stocks, selling was prevalent in a wide range of stocks, especially growth stocks.”

Wall Street finished sharply lower following hawkish comments from a top Federal Reserve official that boosted expectations for more interest rate hikes.

Saying inflation must be reined in, Fed Governor Lael Brainard warned the US central bank was “prepared to take stronger action” if warranted and could move to reduce the Fed’s massive bond holdings as soon as its May meeting.

Brainard’s comments “have markets attuned to further clues on timing and sizing of balance sheet runoff,” economist Taylor Nugent of National Australia Bank said in a note.

The Brainard remarks helped lift the yield on the 10-year US Treasury note above 2.5 percent, well above where it was throughout the Covid-19 pandemic.

The dollar changed hands at 123.96 yen in Asian trade, up from 123.60 yen in New York late Tuesday.

The Tokyo market was weighed down by shipping companies, with Nippon Yusen dropping 5.20 percent to 9,480 yen, Mitsui OSK Lines tumbling 5.24 percent to 3,070 yen and Kawasaki Kisen Kaisha diving 6.07 percent to 7,110 yen.

Uniqlo operator Fast Retailing slid 0.38 percent to 62,270 yen while SoftBank Group fell 2.81 percent to 5,769 yen.

Honda lost 2.15 percent to 3,362 yen after the Japanese carmaker and US giant General Motors said they will expand their tie-up with plans for “co-developing a series of affordable electric vehicles”.