Headline indices of the Japan share market tumbled on Friday, 21 December 2018, as risk aversion selloff continued on tracking the decline in Wall Street overnight on worries over a cocktail of negative factors, including cooling global growth, Federal Reserve's fourth rates hike this year and plan to continue its balance sheet reduction, and as the threat of a partial US government shutdown. Meanwhile, yen appreciation against greenback also weighed on sentiments. Total 32 issues out of 33 issues of the Topix index declined, with shares in Marine Transportation, Other Financial Business, Insurance, Real Estate, Retail Trade, and Banks issues being notable losers. In late afternoon trade, the 225-issue Nikkei index fell 336 points, or 1.65%, at 20,056.58. The broader Topix index of all First Section issues on the Tokyo Stock Exchange shed 36.10 points, or 2.4%, to 1,481.06.

The threat of a US government shutdown and of further hikes in US borrowing costs inflamed investor unease over the economic outlook. The possibility of a shutdown worsened after the Federal Reserve announced another interest rate hike on Wednesday and made only subtle adjustments to the course of monetary policy tightening next year despite rising worries about global growth. The Fed's move on Wednesday to largely adhere to its plan for more rate hikes over the next two years and keep its balance sheet reduction plan on autopilot spooked investors already worried about slowing economic growth.

Adding to the gloom was the possibility of a partial US government shutdown on Friday. President Donald Trump told Republican congressional leaders he will not sign a government funding bill because it fails to include enough funding for border security.

ECONOMIC NEWS: 1) The Bank of Japan kept monetary policy steady on Thursday at its final policy meeting of the year and stuck to its optimistic view on the economy, even as simmering Sino-U.S. trade tensions and volatile financial markets cloud the outlook for global growth. In a widely expected move, the BOJ maintained its short-term interest rate target at minus 0.1% and a pledge to guide 10-year government bond yields around zero percent. Governor Haruhiko Kuroda acknowledged that risks tilted to the downside, while arguing that Japan's economic fundamentals remain solid and momentum toward the 2% price target is maintained. Speaking at a press conference later, Kuroda also said the BOJ has more tools for adding stimulus if needed -- including rate cuts and asset purchases -- and that it's no problem if government bond yields fall into negative territory, so long as the move reflects economic fundamentals and yields remain within the BOJ's target range. The BOJ repeated its previous assessment that Japan's economy is likely to continue expanding moderately, supported by moderate growth in exports and an uptrend in domestic demand. Core inflation is currently around 1%, and likely to increase gradually toward 2%, it said. The vote on the rate decision was 7-2, with Goushi Kataoka and Yutaka Harada dissenting. Kataoka again argued that heightening uncertainties regarding economic activity and prices warranted action to push long-term yields lower. Harada said the trading range for yields was too ambiguous a guide for market operations.

2) Japan's annual core consumer inflation slowed in November, reinforcing market expectations the central bank will hold off on whittling down stimulus for a prolonged period as prices remain distant from its target. The data drew attention to Bank of Japan Governor Haruhiko Kuroda's warning on Thursday that rising economic risks will keep the central bank open to the idea of boosting - not trimming - stimulus. The nationwide core consumer price index (CPI), which excludes the effect of volatile fresh food costs, rose 0.9% year-on-year in November, government data showed on Friday, slowing from a 1% gain in October. The so-called core-core CPI, which strips away the effect of both fresh food and energy costs, increased 0.3% in November from a year earlier, slowing from the previous month's 0.4% gain. The data underscores the challenge the Bank of Japan faces in achieving its elusive 2% inflation target.

CURRENCY NEWS: The Japanese yen, which can be a haven during market uncertainty, appreciated in the lower 111 yen zone against dollar on Friday, as the threat of a US government shutdown and of further hikes in US borrowing costs inflamed investor unease over the economic outlook. The dollar was quoted at 111.17-18 yen compared with 111.24-34 yen in New York and 111.85-87 yen Thursday in Tokyo. The euro, meanwhile, fetched 127.36-37 yen against 127.41-51 yen in New York and 127.67-71 yen in late Thursday afternoon trade in Tokyo.

OFFSHORE MARKET NEWS: US share market declined on Thursday, as investors worry that global economic growth is cooling off, concerns over a partial government shutdown, and that the U.S. could slip into a recession in the next few years. The Dow Jones Industrial Average fell 464.06 points, or 1.99%, to 22,859.6, the S&P 500 lost 39.54 points, or 1.58%, to 2,467.42 and the Nasdaq Composite dropped 108.42 points, or 1.63%, to 6,528.41.