Japanese stocks edged higher on Monday, lifted by a weaker yen, while other Asian markets tumbled after comments from US central bankers on Friday hinted interest rates could be increased sooner than expected.
The benchmark Nikkei 225 added 376.78 points or 2.30 percent to 16,737.49. On the other hand, the TOPIX rose 1.97 percent to 1,313.24.
Statements from US Federal Reserve officials on Friday over potential interest rate hikes this year had boosted the dollar index, which measures the strength of the greenback against a basket of major currencies, from levels near 94.300 to around 95.500.
The stronger US currency also pushed the USD/JPY pair higher, trading at 102.37 on Monday’s trade.
Also weighing on the Japanese currency, Bank of Japan Governor Haruhiko Kuroda said on Saturday that the central bank would authorize further monetary easing without hesitation after the past week’s consumer price data indicated a drop in inflation.
A rather weaker yen raised the nation’s major exporters, with Toyota Motor Corp. (NYSE:TM) closing up 3.99 percent, Honda Motor (NYSE:HMC) gaining 3.70 percent and Mitsubishi Electric (T:6503) adding 3.64 percent.
Meanwhile, the rest of the Asian markets were mostly lower. In South Korea, the KOSPI ended the session down 0.25 percent at 2,032.35. In Hong Kong, the Hang Seng index fell 0.38 percent in afternoon trade.
Shares in mainland China were little changed, with the Shanghai Composite closing lower at 3,070.34, while the Shenzhen composite ended slightly up by 0.2 percent at 2,027.14.
On the other hand, Australia’s S&P/ASX 200 lost 0.84 percent to 5,469.20, with the heavily-weighted financials sub-index lower by 0.82 percent, seemingly due to market concerns over a potential rate hike in the United States.
Fed To Raise Interest Rates
Federal Reserve Chair Janet Yellen delivered a highly anticipated on Friday, saying she was optimistic about the health of the US economy, increasing expectations that interest rate hikes were on track.
Yellen explained that the robust performance in the US labor market as well as forecasts for economic activity and inflation had reinforced the case in recent months for a lift in the federal funds rate.
According to some market experts, Yellen’s remarks were a bit stronger than expected. "Yellen's appearance Friday morning at Jackson Hole proved not to be the damp squib that many were expecting," an analyst said on Monday.
However, he pointed out much of the constant reaction in the foreign exchange and interest rate markets did not come directly from her comment, but the follow up remarks of Fed vice chair Stanley Fischer.
A weaker yen is beneficial for Japan’s exporters as it boosts their overseas profitability. Sentiment among the country’s investors also improved following a weekend speech by Kuroda at the annual Jackson Hole conference.
In addition, energy-related shares also soared with Inpex Corp. (OTC:IPXHY) jumping 3.3 percent and refiner JX Holdings, Inc. (T:5020) 1.6 percent higher.