Nikkei gains trimmed as BOJ survey fuels rate hike speculation

Japan's Nikkei share average tred higher on Monday but erased most of its early gains as Bank of Japan's Tankan survey heightened expectations for an interest rate hike.

By midday, Nikkei was up 0.26 per cent at 39,687.32, having risen as much as 0.9 per cent earlier in session, buoyed by futures tracking higher on Friday. Nikkei futures on Chicago Mercantile Exchange ended 1 per cent higher on Friday. broer Topix index rose 0.49 per cent to 2,823.34.

" BOJ's Tankan survey suggested that Japanese companies will continue to raise prices and inflation will persist," said Shuutarou Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory. "This lifted expectations for a BOJ rate hike, prompting investors to sell stocks to lock in profits."

BOJ's Tankan survey, released on Monday, showed heline sentiment index for large manufacturers at +13 in June, up from +11 in March and slightly above median market forecast of +12. This highest reing since March 2022 reflected a rebound in automobile sector and successful price hikes by manufacturers to offset rising raw material costs.

Japan's 10-year government bond yield rose 3 basis points to 1.075 per cent.

Department store operators saw significant gains, with J.Front Retailing surging 12.76 per cent to become top percentage gainer on Nikkei and Takashimaya jumping 7.9 per cent, after both companies raised ir annual profit forecasts.

shipping sector rose 3.52 per cent, making it top performer among Tokyo Stock Exchange's 33 industry sub-indexes, while insurance sector increased by 2.13 per cent.

On downside, medical equipment maker Terumo fell 2.68 per cent, becoming biggest drag on Nikkei, while microchip equipment maker Lasertec declined 3.63 per cent, making it biggest loser on index.

(With Reuters inputs)