Photo/Illutration The Tokyo Stock Exchange (TSE) building is seen in Tokyo, Japan October 1, 2020. (REUTERS)

TOKYO/SINGAPORE--Japan’s Nikkei share average trimmed losses on Thursday, in another volatile session after embattled Swiss lender Credit Suisse announced plans to strengthen its cash position.

The week has seen wild swings in Japanese banks, causing the Nikkei to fall below 27,000 for the first time since Jan. 23, on fears of contagion from the Silicon Valley Bank meltdown and Credit Suisse’s woes.

The Nikkei was last down 1.2%, with losses over the past five days exceeding 7%.

Credit Suisse said on Thursday it was taking “decisive action” to strengthen its liquidity by exercising its option to borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.

The Nikkei index was last down 315.1 points at 26,914.38, with banks down 4.15%. Among the biggest losers were Sumitomo Mitsui Trust Holdings Inc, down 6.8% and Japan Post Bank Co Ltd, down 5.5%.

The broader TOPIX index was 1.5% weaker at 1930.27.

Japan’s banking sector has been hurt mainly by the losses in Silicon Valley Bank’s bond portfolio, which have drawn attention to the risks for Japanese lenders’ gigantic foreign bond holdings, estimated to be carrying over 4 trillion yen ($30 billion) in unrealized losses.

The shift in the global interest rate expectations has also dashed bets on policy normalization, and improved margins, any time soon for Japanese banks.

Shigetoshi Kamada, general manager at the research department at Tachibana Securities, said the main players in Japan’s stock market were foreigners, and that explained the contagion.

“Investors are forced to sell Japanese stocks to book losses. They have been buying value stocks, such as banks and insurers since the beginning of the year, seeking high dividend payouts and to take advantage of low price-book ratios,” he said.

Including Thursday’s fall, the banking sector index has fallen by almost 17% over 5 days and 5% year to date.

“Declines in Japan’s banking stocks may be a reaction from recent gains in their shares,” said Takatoshi Itoshima, a strategist at Pictet Asset Management. “...the fundamental financial situation in Japan is different from that in the U.S. and Europe.”

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