SYDNEY, June 11 (Reuters) - Japanese shares dropped on Thursday, with automakers and financials leading the declines, as the yen firmed after the U.S. Federal Reserve made no policy changes in the first economic projections of the pandemic era.
The benchmark Nikkei average dropped 1.1% to 22,882.28 by the midday break, further off its 3-1/2-month high touched earlier in the week.
Fed on Wednesday signalled it plans years of extraordinary support for the U.S. economy facing a pandemic-induced recession. Fed Chair Jerome Powell said he was “not even thinking about thinking about raising rates” and that policy would have to be proactive with rates near zero out to 2022.
This pressured rate-sensitive financial stocks. Dai-ichi Life Holdings shed 4.8%, while Mitsubishi UFJ Financial Group (MUFG) slid 3.9%.
In the currency market, the risk of more easing kept the U.S. dollar under pressure, seeing it skid to a one-month low versus the yen to trade at 106.90 yen.
As a firmer yen hurts Japanese manufacturers’ profits made abroad when repatriated, shares of export-oriented automakers came under pressure, with Nissan Motor tumbling 5.1% and Honda Motor diving as much as 4.2%.
The broader Topix lost 0.9% to 1,610.73 by the midday recess, also off its highest level since Feb. 21 touched earlier this week, with all but two of the 33 sector sub-indexes on the Tokyo exchange trading lower.
Highly cyclical sea transport, mining and iron and steel were the worst three performing sectors on the main bourse. (Reporting by Tomo Uetake; Editing by Sherry Jacob-Phillips)