(Bloomberg) -- Japanese stocks trimmed their losses as the yen resumed sliding, easing investor concerns about exporters, though worries about the health of the US economy weighed on the market.
The Nikkei 225 Stock Average was down 0.5% at market close in Tokyo, after declining as much as 3% earlier in the session. The broader Topix dropped 0.7% after falling 2.9% earlier. The yen weakened 0.5% to around 143 per dollar after data showed Japan’s economy expanded in the second quarter at a slightly slower pace than the government’s initial estimate, shedding some of the currency’s sharp gains last Friday.
Technology companies were the heaviest drag on the market as Sony Group Corp. and Tokyo Electron Ltd. dropped, after US nonfarm payrolls data on Friday sparked debate over how much the Federal Reserve should cut interest rates. Gains in domestic-oriented names like retailers and service providers are supporting the market.
“The yen’s weakness offers a sense of relief to investors and markets are paring losses,” said Jumpei Tanaka, a strategist at Pictet Asset Management. That said, the risk of a stronger yen due to expected US interest rate cuts going forward continues to weigh on Japanese stocks, he said.
Japan’s benchmark Topix is down more than 5% over the past four trading sessions, undermining confidence on whether domestic shares will be able to fully recover from their bear-market slide. That’s kept the Topix down about 12% from a record high reached in July. The selloff is driving the implied volatility of the Nikkei 225 back to levels last seen in early August.
“Global investors may be taking risk off and cashing out,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Intelligence Lab Co. They may have decided that concerns about the US economy and the possibility of a significant interest rate cut can’t be dismissed in light of the employment report, he said.
Shares remained lower after economic data backed speculation that Japan’s growth is still advancing enough to keep the nation’s central bank on track to raise interest rates later this year.
The revised gross domestic product may make investors a bit less bullish toward the economy, but other than that, “it’s unlikely to impact stocks very much,” said Masahiro Yamaguchi, a senior market analyst at SMBC Trust Bank Ltd. “It will not change the direction of the Japanese economy.”
--With assistance from Toshiro Hasegawa.
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