With the BOJ and Federal Reserve policy meetings over, attention was shifting to the June 23 “Brexit” vote on Britain’s status within the European Union.
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Financial spreadbetters predicted the gloom would spread to European trading.
Sony rose 1.15 percent to 2,975 yen, while Uniqlo operator Fast Retailing, a market heavyweight, slipped 0.26 percent to 28,255 yen.
USA stocks opened lower today, with the Dow shedding 0.6 per cent in the first five minutes of trading. That hammered Japan’s exporters, sending the Nikkei stock index more than two percent down in the afternoon.
“There were some who had priced in possible easing”, said Norihiro Fujito, a strategist at Mitsubishi UFJ Morgan Stanley Securities, “But with the Brexit vote looming next week, it was also possible that any effects from easing would only last a week”.
The yields on benchmark and superlong Japanese government bonds fell to record lows on Wednesday, as risk-averse investors continued to seek the perceived safety of sovereign debt.
Why did the Bank of Japan leave interest rates unchanged Thursday?
“The committee was actively preparing markets for a June-July rate hike until the release of the May employment report and is unlikely to give up its tightening bias absent additional information that labour markets are weakening”, analysts at Barclays wrote.
And there’s still more than a week to go before the United Kingdom referendum is held. The BOJ surprised investors when it stood pat after its April meeting, triggering a sharp rally in the yen.
The FTSE 100 opened 0.7% lower on Thursday – a performance that instantly erased Wednesday’s uneasy gains following four previous days of heavy falls that saw the index fall below the 6000 barrier. The yen hit a 20-month high of 105.41 to the dollar before stepping back to steady around 105.66.
The perceived safe-haven yen has benefited from investors’ risk aversion.
Economists also worry that a firming yen, which makes imports cheaper, will further dampen inflation.
In share trading, Toyota jumped 1.30 percent to 5,463 yen and Nissan was up 1.25 percent to 1,016.5 yen. As of Thursday, the breakdown followed through to hit its next downside target at 116.00 support, establishing yet a new three-year low, before rebounding and paring some of those losses. The Japanese Yen also climbed as much as 1.8 percent against the Sterling to 149.50, its strongest since August 2013. Second, funds rate projections for 2017 and 2018 declined more than we expected: the median estimate for 2017 fell by 25bp to 1.6%, and for 2018 by 63bp to 2.4%.
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“We get these reminders that while things are growing at a slow rate there are potential pitfalls. reinforcing Fed commentary that the recovery is still somewhat tenuous”, said Jeff Morris, Head of U.S. Equities at Standard Life Investments in Boston.
