Japan's Nikkei share average fell nearly 3 per cent to a 2-1/2-week low on Friday, with steelmakers and automakers hit after President Donald Trump said the United States would impose import tariffs on steel and aluminum .
The Nikkei tumbled 2.9 per cent to 21,101.58 points in mid-morning trade, after falling to as low as 21,088.96, the lowest since Feb 14. The index has dropped 3.6 per cent so far this week. Shares of steel and aluminum companies were hammered, after Trump said the United States would impose tariffs of 25 per cent on steel imports and 10 per cent on imported aluminum, to be formally announced next week.
“Three bad things have hit the Japanese market,” said Toru Ibayashi, executive director of Wealth Management at UBS Securities Japan, referring to a stronger yen, worries about corporate earnings next fiscal year and potential damage to the steel and auto sectors. “These are serving as a headwind to Japanese stocks which are driving away foreign investors.”
He sees downside support for the Nikkei at 20,000. “It may not fall to this level now. The index may rebound once at 21,000, but I think it will fall to 20,000 at some point this year,” Ibayashi said.
The iron & steel sector slumped 3.4 per cent and was the worst sectoral performer. Nippon Steel & Sumitomo Metal Corp dropped 4.4 per cent, JFE Holdings fell 3.7 per cent and Kobe Steel declined 3.8 per cent. Aluminum products maker UACJ Corp shed 2.9 per cent. Automakers, big consumers of steel and aluminum, were sold off on worries over the potentially higher costs on consumers.
“The first impression from the news was very negative,” said Takuya Takahashi, a strategist at Daiwa Securities. “Automakers will have to bear the cost, and they may also have to raise prices while auto sales are already sluggish. This isn't looking good to the auto sector.”
Honda Motor Co tumbled 3.9 per cent, Toyota Motor Corp dropped 2.6 per cent, Subaru Corp shed 2.7 per cent, Nissan Motor Co declined 1.6 per cent and Mazda Motor Corp tanked 3.0 per cent. The broader Topix dropped 2.2 per cent to 1,702.11.