By Kevin Buckland
TOKYO, March 14 (Reuters) - Japanese banking shares
tumbled to the lowest in nearly three months on Tuesday,
dragging the Nikkei share average down more 2% as investors
rushed for the exits amid worries about contagion from the
collapse of Silicon Valley Bank.
Yields on Japanese government bonds plunged to multi-month
lows, tracking U.S. peers amid a global flight to quality that
has flattened yield curves, putting additional weight on lenders
by cutting the outlook for profits.
Expectations for further Federal Reserve rate increases have
also been slashed , along with the chances for a
hawkish shift at the Bank of Japan, which had been the driver
for a nearly 28% surge in the Tokyo Stock Exchange's banking
index since late December that took it to the highest
since 2015 last week.
"The pressure to unwind positions is extremely big here,"
said Yunosuke Ikeda, chief equity strategist at Nomura
Securities, which became the first major forecaster to predict
the Fed would cut rates by a quarter point at its meeting next
week, after previously calling for a half-point hike.
"Hopes have been dashed for near-term BOJ policy
normalisation," Ikeda said. The prospect of higher interest
rates had been "the reason investors have been really excited
about Japan bank stocks."
The TSE banking index slumped as much as 7.5% in the first
hour of trading, with regional banks under particular pressure
but giants like Sumitomo Mitsui Financial Group and
Mitsubishi UFJ Financial Group also sliding more than
7%.
The steep declines came despite more reassurances from
Japanese officials, with Finance Minister Shunichi Suzuki
telling reporters on Tuesday he did not expect SVB's failure to
have a big impact on Japan's economy or financial system. He
declined to comment on its potential impact on BOJ policy.
The Nikkei was 2.3% lower at 27,189.87 as of 0200
GMT, near the session low of 27,104.75, a level last seen on
Feb. 22.
The broader Topix , which is more influenced by
swings in bank stocks than the tech-heavy Nikkei, sank 2.9% to
1,942.61, as was at one point down as much as 3.2% at 1,936.88,
the lowest since Jan. 20.
The yen's surge overnight to a one-month high against the
dollar put pressure on exporters by cutting the value of their
overseas revenues.
Automaker shares tumbled, with Nissan , Mitsubishi
Motors and Mazda all slumping around 6%.
(Reporting by Kevin Buckland; Editing by Bradley Perrett)
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