Yen overshadows election optimism

Japanese shares fell on Monday after rises to the yen and big stock falls in China overshadowed earlier optimism at the general election result.

The victory of Yukio Hatoyama's Democratic Party of Japan had earlier seen the country's main share index, the Nikkei, hit an 11-month high.

However, the yen's rise and Chinese share declines saw the Nikkei end the day's trading down 0.4% to 10,493.

Shanghai stocks ended down 6.2% on fresh fears that shares are overvalued.

The fall dragged down Hong Kong's Hang Seng index, which lost 1.9%.

'Bad impact'

Against the greenback, the yen was up 1% to a seven-week high of 92.54 yen per dollar.

Analysts said the yen was being bought as a haven purchase following the share declines in Shanghai.


This in turn dragged down the stocks of Japan's main exporters, such as Honda, as a higher yen eats into their overseas earnings.

"The election probably had an impact for about the first 30 minutes of trade, when stocks jumped, but then the stronger yen and Shanghai pushed the market lower," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

"Exporters, such as carmakers and tech firms, are very sensitive to the higher yen and even though the market's pretty surely bottomed out, this could still have a bad impact."

The victory of the Democratic Party of Japan ends 54 years of almost unbroken rule by the Liberal Democratic Party.
bbc.co.uk