Japan’s share market was helped by the BOJ’s commitment to almost double its annual purchases of exchange-traded funds (http://www.marketwatch.com/story/bank-of-japan-oks-more-stimulus-keeps-rate-steady-2016-07-29) and indications the central bank is near its limit on negative interest rates, which raised Japan bank share prices.
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Stocks in Japan absorbed the BOJ’s decision a little more easily, in part because the central bank increased the purchases of exchange-traded funds (ETFs) in its easing package.
“Markets may be disappointed that the Bank of Japan didn’t deliver more stimulus overnight – it’s probably just waiting until September, like the European Central Bank – but financials are clearly relieved that it didn’t take interest rates further negative”, said Michael Van Dulken, head of research at Accendo Markets.
The BOJ chose to increase ETF purchase at the end of its two-day rate review on Friday.
The dollar index, which measures the US unit against six major peers, was down 0.4 percent at 96.384 and set a 2-week low at 96.216.
The BoJ hopes to hit the 2 per cent inflation target in fiscal 2017 and 2018, but warned that heightening uncertainties could cause delays. It also left intact the timeframe for hitting its price growth target, but warned uncertainties could cause delays.
“I don’t think we’ve reached the limits both in terms of the possibility of more rate cuts and increased asset purchases”, Kuroda told reporters after the policy meeting. Japan reported further signs of weakness in its economy in June, with industrial output and consumer spending falling. “But it is then expected to continue expanding above its potential growth rate and expand moderately as a trend, with rising income driving spending among companies and households”, said Mr Kuroda.
The yen surged Friday after the Bank of Japan made minor tweaks to its stimulus programme that disappointed dealers who had expected a big announcement to kickstart growth in the world’s number three economy.
“The government is now studying and arranging comprehensive and drastic economic measures”, Aso said.
ANALYST VIEWPOINT: “The Japanese stock market in particular is likely to be nervous about failure to act and any indication that the BOJ’s stimulus policy is coming to an end”, said Ric Spooner, chief market analyst at CMC Markets. Some of them voiced doubts about the plans feasibility with an already massive stimulus program in place which failed to push inflation. Some analysts say the review may lead to more radical steps being proposed.
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The local stock market extended its losing streak, closing below the 8,000-mark on Friday after the Bank of Japan (BOJ) expanded modestly its monetary easing program.
