In Europe, Britain’s FTSE 100 slipped 0.1 percent to 6,713 while Germany’s DAX rose 0.3 percent to 10,305. “Its decision to increase only the amount of ETFs highlights the fact that the bank is facing technical difficulties with its monetary policy”. Australia’s S&P ASX 200 was down 0.1 percent at 5,556.00.
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The monetary policy decision by the Bank of Japan, to be announced later on Friday, has become the focus of currency markets.
The Bank said in a statement that the measures were to prevent uncertainties such as the Brexit vote and the slowdown in emerging economies from denting business confidence and consumer sentiment and to “ensure smooth funding in foreign currencies by Japanese firms and financial institutions”.
Stocks turned higher on the Tokyo Stock Exchange on Friday, helped by buying on dips after sharp falls in the afternoon due to selling in disappointment over the Bank of Japan’s monetary policy decision.
Investors are cautious that the Bank of Japan could fail to meet market expectations by approving only slight easing measures.
The yield on 10-year Japanese government bonds rose initially, to -0.18 per cent, while the Yen rose to ¥102.90 per USA dollar, ending the day up 1.8 per cent at ¥103.37.
The central bank said it would nearly double its annual purchases of exchange traded funds, to 6 trillion yen ($57 billion) from the current 3.3 trillion yen. If Abe is unable to deliver on promises of jump starting the economy with a broad stimulus initiative, the Japanese Central Bank could feel added pressure to lower interest rates deeper into negative territory.
Trading conditions in the dollar versus the yen had been very illiquid going into the BOJ’s announcement, with the bid to ask spread widening to 0.40 yen at one point, although they later narrowed back to around 0.02 yen or so as trading conditions normalised.
“The BOJ did not live up to expectations”.
The dollar index fell 0.4 per cent to 96.33, while the euro inched up 0.2 per cent to just under $1.11.
Unemployment fell to 3.1 per cent in June from 3.2 per cent for the past several months.
European shares fell on Thursday, as markets awaited the release of the stress test results on European banks on Friday night.
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Elsewhere in markets, oil prices fell to fresh three-month lows, with USA benchmark now down more than 20 percent from this year’s peak on growing worries that the world might be pumping more crude than needed. US futures augured a lower opening on Wall Street, with the Dow futures down 0.2 percent and S&P futures also 0.2 percent lower. It’s set for a drop of 7.5 per cent for the week and 15.4 per cent in July. Brent crude futures dropped 1.1 per cent to $42.22.
