SINGAPORE/TOKYO, July 29 (Reuters) – Asian shares slipped after touching a near one-year peak on Friday and the yen strengthened as the Bank of Japan’s fresh stimulus measures disappointed markets, although Japanese stocks recovered on higher purchases of exchange-traded funds.
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A man looks at an electronic board showing the recent exchange rate between Japanese yen against the US dollar and Japan’s Nikkei average (R) outside a brokerage in Tokyo, Japan, June 13, 2016. And with Japanese real GDP expected to print at +0.7% for the second quarter, the Japanese economy clearly continues to struggle – a dynamic that makes the BoJ’s indecision all the more relevant (if not perplexing).
Analysts at Societe Generale said that the majority of analysts expect interest rates to be cut next week, with a small majority expecting the Monetary Policy Committee to resist restarting the asset-purchase programme.
The Bank of Japan said Friday it had chose to provide further monetary easing steps to prop up the world’s third-largest economy amid stagnant domestic spending.
The BoJ’s decision to increase its purchase of ETFs to 6 trillion yen from their previous pace of 3.3 trillion came by a majority 7-2 vote.
It also left untouched the minus 0.1 per cent rate for a portion of commercial banks’ reserves.
“That the BOJ did not increase bond purchases is significant and will disappoint those looking for coordination of monetary and fiscal easing”, said Adam Cole, head of currency strategy at RBC Capital Markets. “The BOJ won’t admit it, but it has reached the limits of quantitative easing and negative rates”, said Mizuho Securities senior economist Norio Miyagawa.
Kuroda justified Friday’s slight easing as aimed at preventing external headwinds, such as weak emerging market demand and Britain’s vote to leave the European Union, from hurting business and household confidence.
The BoJ hopes to hit the 2 per cent inflation target in fiscal 2017 and 2018, but warned that heightening uncertainties could cause delays.
The yen was last up 1.1 percent at 104.11 per dollar, with all eyes on the BOJ’s policy decision, which is usually announced some time between 0230 GMT (10:30 p.m. EDT) to 0500 GMT (01:00 a.m. EDT).
The US dollar index fell 0.31 percent to 96.31 so far.
IG’s Joshua Mahony was unsurprised by BoJ undershooting market forecasts, citing the policy calls by European Central Bank and Bank of England this month. Australia’s S&P ASX 200 was down 0.1 per cent at 5,556.00. Platinum was last at $1,136/1,146, up $10, and palladium rose $9 to $700/705 recently on Friday. Brent crude, used to price global oils, fell 56 cents to $42.68 in London.
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OIL: In the energy market, benchmark US crude lost 1 cent to $41.13 on the New York Mercantile Exchange.
