Futures prices for rubber in Japan conclude lower due to unstable Tokyo stock markets and a stronger yen.
Japanese rubber futures took a significant hit on Thursday, plunging due to a combination of declining domestic tyre demand, accumulating inventories, and a stronger yen, which made yen-denominated rubber futures less attractive to overseas buyers [1].
The weakening demand on the Osaka Exchange was further exacerbated by a risk-off sentiment among investors, as indicated by the weak Tokyo equities [1]. This general uncertainty weighed heavily on the rubber futures market.
The drop in rubber prices also reflected slowing demand for tyres in both China and Japan, which directly impacts rubber consumption as tyres are a major end-use for natural rubber [1][2]. Despite weather disruptions reducing rubber supply, notably in Thailand, the demand weakness had a dominant effect [1][3].
However, expectations of steady domestic demand helped limit the decline in Japanese rubber futures [4]. Additionally, the dollar's weakness was influenced by shifting expectations of U.S. rate cuts [5].
The yen's relative strength remained a selling factor for rubber futures, as a stronger yen makes yen-denominated assets less affordable to overseas buyers [6]. The yen strengthened compared to late Wednesday, trading at around 146.53 against the U.S. dollar [7].
The front-month rubber contract on Singapore Exchange's SICOM platform for September delivery decreased by 0.6% [8]. Similarly, the Osaka Exchange rubber contract for January delivery ended at 317.2 yen per kg, a decrease of 2.2% [9].
Inventory drawdowns were steady in July, raising views of strong domestic demand [10]. Despite this, the rubber prices have been influenced by the Japanese equities market this week [11]. The Shanghai Futures Exchange rubber contract for January delivery settled at 15,635 yuan per metric ton, a decrease of 230 yuan [12].
It's worth noting that the decline in rubber futures was partly due to a lacklustre Tokyo equities market [13]. Comments from U.S. Treasury Secretary Scott Bessent sparked some wagers on an outsized 50 basis point cut, which may have contributed to the dollar's weakness [14].
In summary, falling tyre demand (both domestic and in key consuming regions like China), coupled with risk-off market sentiment and a stronger yen currency, drove the decline in Japanese rubber futures despite underlying supply constraints from weather events in Thailand [1][4][5].
Stocks and indexes were also impacted by the risk-off sentiment among investors, with Tokyo equities showing weakness [11]. In contrast, the strength of the yen made sports assets less attractive to overseas buyers, contributing to the decline in yen-denominated stocks and indices [6].
