Nikkei falls 1 percent; strong yen pressures exporters

By Elaine Lies

TOKYO (BestGrowthStock) – Japan’s Nikkei average fell 1 percent on Thursday as the yen rose broadly, outweighing comments by U.S. Federal Reserve Chairman Ben Bernanke that interest rates would be kept at very low levels for a long time.

Denso Corp (6902.T: ) fell 2.8 percent to weigh on the broader market after authorities said the FBI had raided three Detroit-area Japanese auto parts makers for a sealed federal antitrust investigation, including Toyota suppliers Denso and Tokai Rika (6995.T: ).

Even Toyota Motor Corp (7203.T: ) (TM.N: ) reversed earlier gains made after Toyota chief Akio Toyoda apologized to consumers and pledged reforms to skeptical lawmakers at U.S. congressional hearings.

Market players said that economic indicators were going to prove key for some time as investors tried to gauge the course of the U.S. and global economies.

“Certainly the current environment isn’t good for a rate hike, what with the housing and job situations,” said Hideyuki Ishiguro, a strategist at Okasan Securities.

“But despite what Bernanke said, they seem to be making slow preparations for a rate hike — last week’s discount rate hike, for example.”

The benchmark Nikkei fell 96.87 points to 10,101.96, while the broader Topix (.TOPX: ) lost 0.5 percent to 891.41.

The euro slid to a one-year low against the Japanese currency on persistent worries about Greece’s fiscal woes, while the dollar fell 0.6 percent to 89.62 yen.

Investors fret about a stronger yen because it hurts exporter profits when repatriated.

The Japanese currency’s strength outweighed an earlier boost from Bernanke, who offered a relatively somber assessment of the U.S. economy.

But he also said a weak job market and tame inflation warrant low interest rates for “an extended period”, dampening speculation a policy tightening might be nearing and boosting equities markets worldwide.

A report on new home sales on Wednesday highlighted the Fed’s predicament. Sales slumped more than 11 percent to a record low, suggesting the sector at the epicenter of the financial crisis has yet to fully heal.

YEN STRENGTH

“The yen has gained, particularly against the euro, and this is weighing on the broader market,” said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.

“Support is likely to hold around 10,000, which is where the 200-day moving average comes in, and without new factors there’s no reason to push below this. But there are also no reasons to buy.”

Sony Corp (6758.T: ) slid 2.1 percent to 3,045 yen, while Kyocera Corp (6971.T: ) fell 1.5 percent to 7,990 yen and Tokyo Electron Ltd (8035.T: ) declined 3.2 percent to 5,480 yen.

“Investors will likely keep gains in check as they continue to examine the outlook for the economy. They also still don’t know what kind of result Toyota’s hearings will have in the long term,” said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.

Denso fell to 2,418 yen and fellow parts supplier Tokai Rika lost 5.6 percent to 1,591 yen.

The FBI’s Detroit division served warrants at Denso, Yazaki North America and Tokai Rika on Tuesday evening, a special agent said in a statement. The substance or reason behind the warrants was not disclosed.

Denso, which supplies accelerator pedals and other parts to Toyota, confirmed that the raid on its U.S. offices was part of an investigation into alleged antitrust violations and that it was not related to Toyota’s recalls.

Toyota lost 0.2 percent to 3,270 yen. The stock has shed about 20 percent since its recall crisis intensified on January 21.

Toyoda’s appearance marked a dramatic peak in a safety crisis that broke a month ago with a series of recalls over unintended acceleration and braking problems that now includes more than 8.5 million vehicles globally.

But market players were skeptical about how much the hearing had helped.

“Essentially, nothing has really changed,” said Chibagin Asset’s Osakabe.

“The lifeline for Toyota has always been its quality, and from a marketing point of view this has definitely been hurt.”

Some 1.8 billion shares changed hands on the Tokyo Exchange’s first section, well below the average daily volume last month of roughly 2.6 billion shares, and also below last year’s daily average of 2.3 billion shares.

Advancing stocks outnumbered declining ones, 816 to 729.

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(Additional reporting by Aiko Hayashi; Editing by Chris Gallagher)

Nikkei falls 1 percent; strong yen pressures exporters