Japan Market extends losses on inflation anxiety

Japan share market closed down for second session in row on Wednesday, 12 May 2021, as sentiment was chilled on caution ahead of U.S. inflation data due later in the day, as global investors fretted over whether a potential spike in U.S. inflation could force the Federal Reserve to raise rates earlier than planned.

At closing bell, the 225-issue Nikkei Stock Average declined 461.08 points, or 1.61%, to 28,147.51. The broader Topix index of all First Section issues on the Tokyo Stock Exchange decreased 27.97 points, or 1.47%, to 1,877.95.

Total 31 sub-indexes of the 33 sector sub-indexes on the Tokyo exchange traded lower, with Marine Transportation, Oil & Coal Products, Iron & Steel, Wholesale Trade, Machinery, Pulp & Paper, and Electric Power & Gas sectors being notable losers.

The Tokyo market opened higher, pushed up by bargain buying mainly of technology names that tumbled on Tuesday. But the rebound proved short-lived mounting concerns that inflation could prompt the U.S. Federal Reserve to rethink its monetary easing policy. Market participants appear worried over the impact rising inflation can inject into markets amid continuing upward pressure across commodities. For now, the central bank's interest rates are ultra-low and it buys billions of dollars worth of assets every month. But eventually that will change, and a prolonged increase in inflation could bring about that shift.

Prices are rising all over the place as commodities, shipping costs and more related categories become more expensive. The price jumps affect broader measures of inflation, which in turn could force the Federal Reserve to change its monetary policy stance sooner than expected. Adding to the inflation concerns, the Labor Department released a report showing the number of job openings reached a series high of 8.1 million on the last business day of March. The data led to worries that employers will have to raise wages to entice workers, which could carry over into higher inflation.

Nissan's shares tumbled 10% after the Japanese automaker announcement that its annual operating loss in the year ending March 2021 widened to 150.65 billion yen from a 40 billion yen shortfall in the past year.

CURRENCY NEWS: The U.S. dollar rose to trade at 90.277, up from levels near and above 91.00 in the previous week. The Japanese yen changed hands at 108.73 per dollar, strengthening from last week's levels above 109.00.

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