Hike rates

Tokyo stocks plunge after Fed pledges to hike rates

TOKYO – Shares in Tokyo fell on Monday after U.S. Federal Reserve Chairman Jerome Powell pledged to act “forcefully” against soaring inflation, signaling more rate hikes to come.

The benchmark Nikkei 225 fell 2.66%, or 762.42 points, to close at 27,878.96, while the broader Topix index lost 1.79%, or 35.49 points, at 1,944.10.

The dollar settled at 138.77 yen, down from 137.38 yen seen in New York on Friday after Powell addressed an annual symposium of world central bankers in Jackson Hole, Wyoming.

“The Dow Jones fell after Powell made his hawkish stance clear,” Okasan Online Securities said.

“The Tokyo market was also down across the board on Monday,” the brokerage said, noting that chip-related stocks in particular were facing selling.

In Jackson Hole, the Fed chairman underscored his determination to “use our tools forcefully” to fight inflation, even if it meant causing pain for American families.

His speech dashed any hope that the U.S. central bank could slow the speed of its rate hikes or even revert to lower rates to avoid an economic slowdown, analysts said.

After Powell’s remarks, the Dow closed down 3.0% while the tech-heavy Nasdaq index lost 3.9%.

In Tokyo, Advantest, which makes chip test kits, fell 4.18% to 8,010 yen, while Tokyo Electron, which produces tools to build semiconductors, plunged 5.10% to 43,530 yen. SoftBank Group lost 3.66% to 5,496 yen.

Olympus fell 3.86% to 2,959 yen. After the deals ended, the optical equipment maker announced the sale of its microscope subsidiary to Bain Capital for 427.7 billion yen ($3 billion).

Honda gained 0.41% to 3,669 yen after Japanese business daily Nikkei reported that the automaker had decided to set up an electric vehicle battery factory with LG Energy Solution in the United States.

Honda did not confirm the information when contacted by AFP.