Summary A stronger yen is negative for Japanese exporters as it makes them less competitive abroad.
TOKYO (AFP) - Tokyo stocks fell 0.65 percent Thursday morning after a surprisingly dovish forecast by the Federal Reserve for US economic growth and interest rates sent the yen surging against the dollar.
The Nikkei 225 index at the Tokyo Stock Exchange slipped 126.10 points to 19,418.38 by the break, while the Topix index of all first-section shares shed 0.70 percent, or 11.11 points, to 1,571.35.
After a two-day policy meeting, the Fed on Wednesday issued a statement that removed a pledge to remain "patient" on raising interest rates, signalling a possible mid-year rate increase.
But bank chair Janet Yellen stressed growth prospects were more muted than three months ago, despite strong increases in jobs creation. She noted consumer spending has slipped, inflation has declined, wages are flat, and the stronger dollar has hurt US exports.
The bank lowered its rate outlook to 0.5-0.75 percent for the end of this year from 1.0 percent previously, while also reducing its 2016 forecast to 1.75-2.5 percent from 2.5 percent. It also cut its growth forecasts.
"The Fed s view on raising rates is now closer to investors expectations, which has removed some uncertainty from the market," Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank, told Bloomberg News.
"However, they downgraded their view of the economy. That s a cause for the yen to rise, and Japanese stocks are being dragged down by the currency today."
In Asian forex trade, the dollar briefly fell below 120 yen before ticking up to 120.22 yen by midday, well down from 121.35 yen level in Tokyo before the Fed announcement.
A stronger yen is negative for Japanese exporters as it makes them less competitive abroad and erodes the value of repatriated profits.
In Tokyo share trading, Japan s biggest bank Mitsubishi UFJ fell 2.22 percent to 788.7 yen, Sony dipped 0.47 percent to 3,394.0 yen and market heavyweight Fast Retailing, operator of the Uniqlo clothing chain, dropped 1.3 percent to 45,540.0 yen.
But Nintendo shares, which shot up more than 21 percent on Wednesday after it unveiled a plan to move into smartphone gaming, rose another 12.7 percent to 19,250.0 yen.
And electronics giant Sharp gained 2.15 percent to 238.0 yen on reports that the struggling firm is considering a bigger overhaul of its business, including cutting 10 percent of its workforce in Japan.
Trading company Mitsui & Co. slipped 0.12 percent to 1,651.0 yen as it announced a deal to pay $750 million for a 20 percent stake in US-based Penske Truck Leasing.
In New York, the Dow Jones Industrial Average climbed 1.27 percent, the S&P 500 jumped 1.21 percent and the Nasdaq advanced 0.92 percent.
