TOKYO -- Investors here are sticking with companies driven by domestic demand ahead of central bank meetings through Thursday, flocking to retailers and papermakers while selling off shares in exporters.
Daio Paper hit a year-to-date high Tuesday, when it upgraded its earnings forecast for the year ended March 31. Stationery producer Kokuyo climbed 10% after revising guidance upward Monday. Nishimatsuya Chain hit a roughly nine-month high, with Takara Holdings and Tokyu scoring large gains as well.
The Nikkei Stock Average remains 9% lower than at the end of 2015, falling 0.49% to land at 17,353 on Tuesday. But Nikkei subindexes for individual industrial categories reveal a wide gap between companies reliant on business at home and those thriving on demand abroad. The pulp and paper, food, and railway and bus categories were among those that surged Tuesday. But marine transport shed 4.7%, while automobile and autoparts makers dropped 1.6%.
The U.S. Federal Reserve's meeting Tuesday and Wednesday, and the Bank of Japan policy board's gathering Wednesday and Thursday, are pushing investors away from foreign-demand stocks. Both events could set off waves in foreign exchange markets.
How monetary policy will shift is difficult to predict, noted an analyst at SMBC Trust Bank. Companies with earnings easily swayed by the yen's exchange rate are thus having trouble attracting investors.
Wary of pushback
Many market players expect the BOJ to reveal plans for further monetary easing. But many are also leery of a strong reaction if these expectations are not met. Ensuing swings in the currency market could shake foreign-demand stocks. So investors are putting money into domestic-demand stocks, which are seen being impacted little.
The yen hovered in the upper 110 range against the dollar Tuesday evening. The market has "already priced in additional easing from the BOJ," said Tetsuo Seshimo of Saison Asset Management. If additional easing is not announced, the yen could grow a good deal stronger. Investors thus "feel safer buying stocks fed by internal than by external demand."
The Fed is expected to basically stand pat on policy. A statement hinting at an interest rate hike in June could cause the dollar to strengthen against the yen, potentially sending funds back into externally driven companies. But few have yet come out with confident predictions to that effect.
"Investors' attention will shift to company earnings and government economic policy" starting next week, said Koji Toda of Resona Bank. Stimulus measures, including a potential delay in Japan's consumption tax hike, will shape movements by domestic-demand stocks once again.