Japanese stocks decline as Abe's revival plan disappoints

The yen firmed up versus the dollar and euro as Japanese stocks declined after prime minister Shinzo Abe failed to provide additional detail on stimulus measures, boosting demand for safer assets.

Japan's currency gained against 14 of its 16 major counterparts following the Topix index of shares falling over 3 per cent. A measure of volatility of Group-of-Seven currencies approached the highest since February. Australia's dollar was down after the gross domestic product of the nation grew at the slowest pace in almost two years. Sweden's krona weakened following the nation's services sector shrinking more than economists forecast last month.

According to Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London, there was general disappointment that Abe did not announce anything that was surprising or new. He added, there was some disappointment in Japanese stocks and that was pushing the yen up. He added, the Australian dollar was is likely to remain pressured after the GDP data.

With Abe outlining his ''third arrow'' of an economic revival plan aimed and building on fiscal and monetary stimulus, the yen rose, stocks extended losses and Japanese government bonds rose. 

Meanwhile, Japan's Nikkei share average sagged 3.8 per cent to a two-month low today after a speech by Abe on his growth strategy to revive the world's third-largest economy failed to enthuse investors.

Abe's campaign to counter deflation with massive fiscal and monetary expansionary policies had sent the Nikkei over 80 per cent higher from mid-November to 23 May.

The benchmark lost 18.4 per cent on concerns of a slow down in growth in China and with the US Federal Reserve rolling back its massive stimulus program. It was still up about 5 per cent since 4  April, when the Bank of Japan announced wide ranging measures.

According to some analysts, a healthy correction was needed and it was happening. They say the market was trying to find a base.

Shares in Tokyo Electric Power Co declined to their daily limit following the operator of the crippled Fukushima Daiichi nuclear plant reporting further leak of radioactive water as it tried to cleanup the worst nuclear disaster since Chernobyl in 1986. The stock plunged 16.3 per cent and was the most traded on the main board by turnover.