LONDON (AP) — Japanese shares led markets lower Wednesday after a minister warned over an excessive fall in the value of the yen. Elsewhere, markets were subdued amid ongoing U.S. budget concerns and despite forecast-busting earnings from Goldman Sachs.
The Japanese currency has been sold off sharply in recent weeks, and that's helped the country's main stock market clamber up to 32-month highs — a lower currency makes Japanese goods potentially more competitive in the international marketplace, thereby helping the national economy to grow.
However, while making exports cheaper, a lower currency can stoke inflation by making imports more expensive, and that's important for a country that's dependent on foreign sources for things like oil.
Kyodo News Agency reported that economy minister Akira Amari voiced exactly those concerns and that prompted a reverse in the Nikkei 225 index, which closed 2.6 percent lower at 10,600.44 alongside the recovery in the yen.
However, by late afternoon London time, the dollar had recovered somewhat to trade only 0.2 percent lower at 88.64 yen. Earlier, it had traded as low as 87.76 yen, a couple of yen below where it was trading at one point Tuesday.
Many analysts had anticipated that the impact on the yen of the comments from Amari would be anything more than short-lived. The yen has been falling over the past couple of months in anticipation of economy-boosting measures that will dilute the value of the yen.
"While the intervention has resulted in a minor correction, it has not been dramatic and we think it does not alter the trend towards further yen depreciation," said Neil MacKinnon, global macro strategist at VTB Capital.
Elsewhere, markets were subdued for the second-day running. Over the first couple of weeks of 2013, many stock indexes hit multiyear highs on relief that U.S. politicians cobbled together a last-minute budget deal to avoid the so-called 'fiscal cliff' of automatic tax rises and spending cuts that would have come into effect on Jan. 1.
In Europe, Britain's FTSE 100 fell 0.2 percent to close at 6,103.98 while Germany's DAX rose an equivalent rate to 7,691.13. The CAC-40 in France ended 0.3 percent higher at 3,708.49.
In the U.S., the Dow Jones industrial average was 0.2 percent lower at 13,510.43 while the broader S&P 500 index was flat at 1,471.96.
Traders are increasingly nervous about a fight brewing in Washington over raising the U.S. debt ceiling so that the government can keep borrowing money to pay its bills. The U.S. Treasury says it will run out of money to pay all the government's obligations sometime in February or March if Congress doesn't raise the current $16.4 trillion limit on borrowing.
Republican lawmakers say they will demand major spending cuts in exchange for any agreement to raise the debt limit. But President Barack Obama has said he won't negotiate on the debt limit.
"The post-fiscal cliff rally has been looking weaker and weaker of late, as the bulls struggle to lift markets beyond recent highs," said Chris Beauchamp, market analyst at IG.
Upbeat earnings from Goldman Sachs shored up sentiment at the U.S. open, though that was outweighed by concerns over Boeing. Japan's two biggest airlines grounded all their 787 planes for safety checks after one was forced to make an emergency landing. Goldman Sachs' share price was up around 2 percent but Boeing's was around 4 percent lower.
The day's lukewarm trading started in Asia. Hong Kong's Hang Seng fell 0.1 percent to 23,356.99. South Korea's Kospi fell 0.3 percent to 1,977.45.
Oil prices were higher, with the benchmark New York contract up 90 cents at $94.18 a barrel, while the euro was down 0.1 percent at $1.3298.
Pamela Sampson in Bangkok contributed to this story.