Japan Nikkei extends losses on trade deficit data, ahead of Fed decision

Headline indices of the Japan share market were lower on Wednesday, 19 December 2018, after data showed export growth stalled last month. Investors remained cautious ahead of the U.S. Federal Reserve's upcoming interest rate meeting decision due on Wednesday and Bank of Japan's monetary policy decision due on Thursday. Total 24 issues out of 33 issues of the Topix index declined, with shares in Mining, Electric Power & Gas, Oil & Coal Products, Securities & Commodities Futures, Pharmaceutical, and Banks issues being notable losers. In late afternoon trade, the 225-issue Nikkei index fell 120.71 points, or 0.6%, at 20,994.74. The broader Topix index of all First Section issues on the Tokyo Stock Exchange shed 6.78 points, or 0.43%, to 1,555.73.

On Wednesday, Japan reported that its trade balance in November was a deficit of 737.3 billion yen, from 450.1 billion yen in the previous month. This is its fourth deficit in last five months. The country's exports broadly slowed, partly due to weakening demand from China. Japanese exports rose 0.1% from a year earlier, as compared to October's 8.2% gain. This fuelled concerns about the impact of the US-China trade dispute on the world's third-largest economy.

Investors are cautious ahead of the Federal Reserve's interest rate decision Thursday morning. The rate decision will be followed by a press conference with chairman Jerome Powell. The market is pricing in a 70% chance of a US rate hike however economists will pay most attention to the tone of Fed Chair Jerome Powell's statement. Many investors now expect signs of economic turbulence would prompt the Fed to signal a slowdown in the pace of tightening next year.

The Bank of Japan's monetary policy decision is due on Thursday, followed by a briefing from Governor Haruhiko Kuroda. A Bank of England decision is also scheduled on Thursday.

Crude oil prices bounced back slightly in Asian trade on Wednesday after plunging on worries about rising supplies and weakening global growth, which could weigh on demand. Benchmark U.S. crude gained 12 cents to $46.72 a barrel in electronic trading on the New York Mercantile Exchange. The contract gave up $3.60 to $46.60 on Tuesday. Brent crude, used to price international oils, added 34 cents to $56.60 a barrel. It lost $3.35 to $56.26 a barrel in London.

Shares of exporter were mostly lower on a stronger yen. Panasonic, Sony, and Canon were lower in the range of 0.5% to 1%. Tech companies Advantest rose 2.8% and Fujitsu rose 1.7%.

Among individual stocks, Shares of SoftBank Corp., the mobile unit of tech giant SoftBank Group, fell around 10% following its massive initial public offering, which sought to raise about $18 billion.

CURRENCY NEWS: The Japanese yen, which can be a haven during market uncertainty, appreciated in the mid 112 yen zone against dollar on Wednesday, as global growth worries escalated and oil prices fell for a third straight session on concerns about oversupply. The dollar was quoted at 112.52-53 yen compared with 112.47-57 yen in New York and 112.51-53 yen on Tuesday in Tokyo. The euro, meanwhile, fetched 127.99-128.00 yen against 127.84-94 yen in New York and 127.78-82 yen in late Tuesday afternoon trade in Tokyo.

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