The BoJ said it was scrapping its focus on a money supply target in favour of a new “yield curve control”, allowing it to buy long-term government bonds to keep 10-year bond yields stable.
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It will continue to buy assets such as government bonds, at the rate of 80tn yen ($787bn; £605bn) a year.
The broader Topix index of all first-section issues jumped 2.71 percent, or 35.70 points, to 1,352.67.
“There’s more expectation that the Fed will hold, but it will be a more hawkish hold”, said Quincy Krosby, market strategist at Prudential Financial. “I struggle to see the action from the BoJ having a dramatic impact for emerging markets”, said Cristian Maggio, head of emerging markets strategy at TD Securities.
The BOJ in July announced a comprehensive review of its policies to assess their effectiveness and determine how to reach its distant 2 per cent inflation target.
“With a view to achieving the price stability target of 2 percent at the earliest possible time, the Bank made a decision to introduce “QQE with yield curve control”,” the bank said in a statement on Wednesday.
ANZ added 45 cents, or 1.7 per cent, to $27.24, NAB gained 36 cents, or 1.3 per cent, to $27.48, Westpac rose 20 cents, or 0.7 per cent, to $29.94 and Commonwealth Bank put on 27 cents, or 0.4 per cent, to $72.89.
“With regard to the outlook, sluggishness is expected to remain in exports and production for some time, and the pace of economic recovery is likely to remain slow”, it said.
But the negative interest rate policy was considered a failure by some in Japan’s financial circles because it pushed the Japanese yen higher against the USA dollar, making the price of Japanese goods more expensive overseas, which threatened Japan’s economic recovery.
Spot gold rose 0.4 percent to US$1320.30 an ounce, and further gains are expected if the Fed holds back from a rate increase.
With the global economy showing few signs of rebounding and investors fretting about the limits of monetary easing by major central banks, the BOJ’s move initially came as a welcome relief for markets, particularly financial sector shares.
At the outset, the BOJ’s overhaul of its quantitative easing program appeared bold – shifting from targeting the volume of asset purchases to levels on the yield curve, keeping its negative short-term policy rate and aiming to overshoot an already ambitious 2 percent inflation target. The BOJ will aim to keep the interest rate on 10-year bonds at zero. Inflation remains far below the bank’s target and the country’s currency, the yen, has strengthened significantly against the dollar this year, hurting exporters.
Both hawkish and dovish comments from Fed officials recently have stoked volatility in financial markets, although consensus is now centred on a USA rate hike by year-end.
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Oil prices held early gains with USA crude oil futures up 1.9 percent to $44.93 per barrel.
