MARKET EYES: Japanese brokers jittery over 10-day holiday

February 3, 2019

Tokyo--Japanese brokers are jittery over possible wild swings in domestic stocks after an unprecedented 10-day holiday break from late April, during which the Imperial succession is slated to take place.

The Tokyo Stock Exchange and other stock markets in Japan will be closed between April 27 and May 6 as stock-related financial settlements will be difficult due to the closure of banks in the country.

Meanwhile, foreign financial markets will be open on weekdays as usual.

The longest holiday break for Japanese stock exchanges so far is an eight-day spell. The most recent one is the year-end and New Year holidays of 1986-1987, when the last trading day in a year was Dec. 28.

Since the last trading day was changed in principle to Dec. 30, a six-day holiday is the longest break.

Tokyo stocks tumbled on the first trading day of 2019 on Jan. 4 after a six-day holiday from Dec. 29, bruised by a stock plunge overseas and the yen's sharp rise during the period.

Unlike in the 1980s, information spreads in a flash through the Internet, and high-frequency trading is gaining greater presence. The risks associated with a long stock market break have therefore increased.

"It's impossible that the market will suffer no impact" as important events are scheduled overseas during the 10-day period, an official of a major securities firm said.

A two-day monetary policy meeting of the U.S. Federal Reserve is slated to begin April 30. The U.S. government's jobs data are to be released May 3.

"A decision to tighten U.S. monetary policy would trigger stock selling," the official said.

Securities firms in Japan plan to make preparations to cut the impact of possible sharp price movements.

Concerns have spread also to individual investors.

Many securities firms in the country will be closed and their trading systems will be stopped. This means that their customers cannot trade not only domestic but overseas stocks.

Daiwa Securities Group Inc. <8601> will utilize its sales staff to let information on its services available during the period fully known to clients, said Mikita Komatsu, senior executive managing director.

"It'd be best to cash in stocks before the holiday period if you don't want to take risks," an official of a bank-linked securities firm said.

"Japan has more public holidays than other countries," said a senior official of a foreign-affiliated securities firm. "A decrease in trading opportunities is a risk and this may lead investors to shy away from Japanese stocks."

Late April and early May also fall on an earnings reporting season.

To prevent a concentration of earnings releases before or after the 10-day break, the TSE has told the listed companies that it will flexibly apply its rule requiring them to report earnings within 45 days from the end of a term. Jiji Press