The yen’s surge on Friday caused what would be the equivalent of ¥39.3 billion (Dh1.3bn) in annual losses for Japan’s five biggest trading houses, according to Bloomberg. Profits fall at Japan’s trading companies when the nation’s currency appreciates because of their extensive overseas operations. The Japanese currency surged as much as ¥7.14 to ¥99.02 against the US dollar, and traded at 102.84 at 9.21am. in London.
Below is a timeline of events as the result of the UK vote to leave the European Union became clear.
All times UAE
Japanese stocks suffered their biggest daily fall in more than five years on Friday, roiling financial markets and raising fears of a shock to the already fragile global economy.
The Nikkei ended down 7.9 per cent at 14,952.02 points, after falling as low as 14,864.01 at one point, its weakest since October 2014.
The Nikkei’s drop was its steepest since March 2011.
Exporters tumbled across the board on the yen’s strength, with Bridgestone losing 8.5 per cent, Toyota Motor shedding 8.7 per cent and Panasonic falling 8.3 per cent.
Companies with production hubs in Britain suffered. Hitachi, which manufactures trains in Britain, fell 10.3 per cent. Nissan Motor, which makes cars in the UK, lost 8.1 per cent.
The broader Topix dropped 7.3 per cent to 1,204.48 and the JPX-Nikkei Index 400 declined 7.3 per cent to 10,869.19.
Turnover in the broader market surged to ¥3.33 trillion (Dh116.3 billion) from Thursday’s ¥1.57tn.
Brexit may cause Japanese financial companies to doubt the creditworthiness of European banks, says the leading Japan-based economist Jesper Koll, who last year became the chief executive of WisdomTree Japan, a local office of WisdomTree Investments, a New York exchange-traded fund (ETF) and ETF product sponsor and asset manager.
But the Leave vote will only have a minor impact on corporate Japan, he says.
“London is a financial centre, not a commercial or industrial centre. The key is financial.”
Twenty-five to 35 per cent of Japanese financial companies’ non-yen earnings take place in London. As a result of the Leave vote, the future of London as a financial centre has been put into question, Mr Koll says. “There is a potential for dislocation.”
By contrast, barely 5 per cent of listed Japanese companies’ earnings come from Europe, including the United Kingdom, while 25 per cent come from North America, 12 per cent from China, and 8 per cent from the rest of Asia. So for corporate Japan, Europe is not a significant market, Mr Koll says.
“Since the Euro-crisis started a few years ago, corporate Japan has focused on North America and Asia, not Europe.”
“As people will now question the creditworthiness of European banks, the issue is how to avoid a Lehman-type event,” Mr Koll says. “We need to see in the next week to 10 days if London stays solid as a financial centre.”
The US dollar nosedived and temporarily broke through the ¥100 line Friday morning in Tokyo for the first time in over two years as worries about Britain exiting the European Union grew stronger, the Japanese Kyodo News Agency reported.
At noon, the dollar fetched ¥101.55 compared with ¥106.09 in New York and ¥104.43 in Tokyo at 5pm Thursday. After mostly trading at ¥104-105 levels in the morning, the dollar tumbled in late morning below the ¥100 line for the first time since November 2013 before swinging back to the mid-¥101 zone.
Asked about the currency volatility, Masatsugu Asakawa, vice finance minister for international affairs, said the Japanese government will consider appropriate steps without commenting on whether Japanese authorities stepped into the currency market.
As early returns of a closely fought British referendum showed the Leave camp was leading Remain, market participants grew increasingly uncertain about vote results and sought a haven in the yen and other assets deemed relatively safe, analysts said.
“I think market participants had been pricing in the Remain scenario too much (before the vote) and the trading moves in the morning appeared to be a correction of that,” Gaitame.com Research Institute senior researcher Takuya Kanda said.
Tokyo stocks dived more than 3 per cent in volatile trading Friday morning on growing concerns that Britain may have selected to leave the European Union, Kyodo News Agency reported.
The 225-issue Nikkei Stock Average shed 495.95 points, or 3.05 per cent, from Thursday to 15,742.40. The broader Topix index of all First Section issues on the Tokyo Stock Exchange was down 41.18 points, or 3.17 per cent, to 1,257.53. Every industry category on the main section lost ground, led by mining, transportation equipment and marine transportation issues.
Tokyo stocks opened higher but fluctuated wildly between gains and losses after the early results of Thursday’s referendum on Britain’s EU membership began pouring in to indicate an extremely tight race. Shares had moved upwards on reports that early results favoured Remain, and reversed course when results suggested “Brexit” votes were gaining momentum, before eventually settling in negative territory in the morning.
“Gloom is gathering in the market as results are showing that Britain may have voted to leave,” said the Nomura Securities investment research and investor services department vice president Maki Sawada. “The market is far more nervous than expected. Polls before the referendum were showing that Britain was leaning toward a ‘Remain’ vote and risk appetite was reviving but fears that the country may have voted to leave is gripping sentiment again,” Mr Sawada said.
Toyota Motor fell ¥330, or 5.8 per cent, to ¥5,407, Hitachi shed ¥18.80, or 3.9 per cent, to ¥465.20 and Mazda Motor declined ¥87, or 4.9 per cent, to ¥1,686. Sharp sagged ¥18, or 13.5 per cent, to ¥115 after the Tokyo Stock Exchange announced Thursday that the electronics manufacturer will be moved to the bourse’s Second Section from the First Section from August 1 due to its liabilities.
The yield on the benchmark 10-year Japanese government bond fell within negative territory Friday morning as investors bought the debt on growing concerns that Britain has voted to leave the European Union, Kyodo News Agency reported.
The yield on the No343, 0.1 per cent issue, the main barometer of long-term interest rates, ended morning interdealer trading at minus 0.155 per cent, down 0.010 percentage point from Thursday’s close. The price of the September futures contract for 10-year bonds rose 0.21 point to 152.34 on the Osaka Exchange.