dailyfx financial markets headlines

A clean release slate and hawkish comments out of Europe kept USD/JPY trading volume light early Tuesday morning.  A slightly weakened dollar suffered early on despite conflicting rumors of a 25 or 50 basis point hike looming Thursday.  However, the Yen slipped on reports that Bank of Japan Governor Fukui's wife held substantial stock in Hanshin Railways, whose takeover by Hankyu Railways was at least in part thanks to the recently embattled Murakami Fund.  The controversy surrounding Fukui has been a thorn in the Yen recently, and with a further gap in interest rates approaching on Thursday, along with mixed data out of Japan, traders have grown increasingly wary of the currency.  As of 6:00 GMT USD/JPY traded at 116.25, down from Monday's New York close of 116.29.

Concerns over a potential 50bp rise in US interest rates also hit the Japanese stock market this morning, causing export stocks to fall.  The Nikkei 225, however, remained overall unchanged at 15,147.6 while the Topix fell only 0.1% to 1547.9.  Exporter Canon, the largest digital camera maker in the world, slipped 1.9% to Y5,360 while Sony fell 1.6% to Y4,890.  Honda dropped 1.2% to Y3,600, while Toyota fell 0.5% to Y5,800.  Miners and smelters managed to balance out the losses, as they were boosted by overnight consolidation announcements in the US.  Mitsubishi Materials jumped 1.7% to Y475 and Sumitomo Metal Mining climbed 1.4% to Y674.  Also helping offset the losses were Japanese steelmakers, with Mittal Steel successfully completely a five-month bid for the takeover of Arcelor of Luxembourg. JFE, Japan's second largest steel maker, climbed 2.2% to Y4680.  In retail, Daimaru shares went up 3.2% to Y1,663 on a buy recommendation from Goldman Sachs, while Isetan rose 1% to Y1,996.  Finally, after Daikin Industries' annoucement of the acquisition of Malayasian OYL it expects to become the leader in the air conditioner industry, driving prices up 4.6%.

10 year Japanese government bonds saw yields fall 2 basis points to 1.870% as prices inched up to 100.252.

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