Asia report: Japan slumps after sales tax delay

Trading in Asia was choppy on Thursday, with shares in Japan slumping off the back of fresh acknowledgement of a softer economy from the government.

In Japan, the Nikkei 225 fell 2.32% to close at 16,562.55, extending losses from Wednesday after the Prime Minister announced plans to delay a sales tax hike for two years.

The yen strengthened against the greenback during the session, and was last trading 0.6% stronger at JPY 108.88 per USD.

On Wednesday, Prime Minister Shinzo Abe confirmed speculations that a planned hike in the country’s domestic sales tax would now not take place until 2019, because of an increasingly softer economy and growing risks from China and other emerging economies.

“This is not the first time for the consumption tax hike to be pushed back. The second delay this time may have increased investors' concerns about economic uncertainties and skepticism about Abenomics,” read a note from DBS on Thursday.

“The postponement of the tax hike raises doubts over the sustainability of Japan's public debt.”

There were also concerns from analysts that the move could put the lid on further easing from the Bank of Japan, but reducing the chances of a full-blown economic slowdown.

Consumer stocks didn’t see much benefit from the delay in the sales tax rise, with Fast Retailing losing 2.71% and Takashimaya down 2.96%.

Airbag producer Takata was down by 5.1%, after the Ford Motor Company revealed it was recalling 1.9 million vehicles with defective airbag inflators made by the Japanese company.

Markets on the mainland fared better, with the Shanghai Composite up 0.4% at 2,925.07, while the Shenzhen Composite added 0.97% at 1,904.72.

In Hong Kong, the Hang Seng Index finished 0.47% higher at 20,859.22, while the Kospi in South Korea was up 0.12% to 1,985.11 at close.

Crude prices were mixed through the day, and began to rise towards the end of the session. Brent crude was last ahead by 0.22% at $49.83 per barrel, and West Texas Intermediate also added 0.22% at $49.12.

The oil-producing OPEC cartel was getting underway behind closed doors in Vienna soon after Asian markets closed for the day, with market chatter pointing to an unlikelihood of a production limit.

Australia’s S&P/ASX 200 closed 0.83% lower at 5,278.90, with the materials and financial subindexes dragging the benchmark down.

The country’s retail sales rose 0.2% in April from March, data released during the day revealed, though that was lower than expectations for a 0.3% increase.

Clothing and shoes led the rise, the Australian Bureau of Statistics said, along with food and beverage services and household goods.

Energy shares in the sunburnt country were lower, with Santos losing 2.3% and Woodside Petroleum down 0.59% in Sydney.

In New Zealand, the benchmark S&P/NZX 50 lost 0.3% to 7,003.13.

Local oil refiner and fuel retailer Z Energy uo 2.2% after the New Zealand Superannuation Fund, the state pension fund, sold most of its stake for NZD 292m, leaving it with 1.5% of the former Royal Dutch Shell operation.

The down under dollars finished the day weaker, with the Aussie slipping 0.48% to AUD 1.3846 against the greenback and the Kiwi 0.2% weaker at NZD 1.4698.