Japan’s Nikkei slumps to weekly loss despite softer yen

Japan’s Nikkei share average fell on Friday and logged its worst week in more than a month despite the tailwind from a weaker yen, as the decline on Wall Street and caution after major central bank policy decisions weighed.

The Nikkei closed 0.29% lower at 38,701.90, bringing it to a weekly decline of 1.66%, its steepest decline since early-November.

The broader Topix lost 0.44%, and fell 1.19% for the week, the index’s sharpest weekly drop since mid-October. Stocks drew little support from the Bank of Japan’s (BOJ) decision to not hike interest rates on Thursday or from Governor Kazuo Ueda’s news conference where he said considerable time was required to judge the outlook for domestic wages and overseas economies, chiefly the U.S.

This came after the U.S. Federal Reserve signalled a more cautious pace of rate cuts in 2025, after trimming rates by a quarter point on Wednesday.

That sent the U.S. S&P 500 diving almost 3%, its biggest single-day decline since early August.

An invigorated dollar and an out-of-favour yen saw the pair touch 157.93 on the day for the first time since mid-July on Friday. Japan’s Finance Minister Katsunobu Kato and top currency diplomat Atsushi Mimura called the yen’s sharp slide “alarming”, and said officials are ready to take “appropriate action”. “With the weekend approaching, investors have a high sense of caution about what is next for the yen,” said Maki Sawada, an equities strategist at Nomura Securities. Concerns about the potential for currency volatility may have stifled a potential relief rally following a week of huge, market-moving events, she said.

Carmakers, at least, were supported by the weaker yen, which boosts the value of overseas sales. Toyota gained 1.74%.

Real estate was the best performer among the Tokyo Stock Exchange’s 33 industry groups, climbing 2.39% as Japanese government bond yields sank to one-month lows.

Banks, which tend to move in tandem with bond yields, were the worst sectoral performers, shedding 2.67%.

Kadokawa fell by its daily limit of 16% after the media powerhouse behind the “Elden Ring” game announced a capital tie-up with Sony, instead of a widely anticipated acquisition. Sony added 0.74%.