Tokyo stocks end up 2.20pc after BoJ move

April 04, 2013 - 9:59:53 am
TOKYO: Tokyo stocks surged 2.20pc at the close Thursday after the Bank of Japan unveiled fresh easing measures, reversing a heavy drop earlier in the day.

The benchmark Nikkei 225 index gained 272.34 points to 12,634.54, while the Topix index of all first-section shares rose 2.70pc or 27.33 points, to 1,037.76.

In volatile trade, the Nikkei's close was more than 558 points above the day's low, a turnaround that largely came after the central bank chief's announcement of easing, which sent the yen plunging.

The Nikkei had opened 1.4pc down from the previous day's close and fell further to 12,075.97 in the morning.

The closely-watched announcement came after the central bank's first policy meeting under a new leader who has vowed to turn around the stuttering economy.

It was welcomed as a "positive surprise" by investors, who had been concerned Haruhiko Kuroda would fall short of expectations after promising to reverse decades of deflation and limp growth.

The Nikkei may rise to as high as 14,500 this year, Nader Naeimi, head of Dynamic Asset Allocation at AMP Capital in Sydney, told Dow Jones Newswires.

"The BoJ's plan is a lot more aggressive than the market expected. I'm a lot more confident in Japan than any other market now," Naeimi said.

After a two-day meeting the central bank said it would embark on an aggressive spending programme, boosting asset purchases including Japanese government bonds, while pledging to meet a 2pc inflation target within two years.

The moves would see the BoJ "enter a new phase of monetary easing both in terms of quantity and quality", it said in statement.

Among its purchases will be exchange-traded funds (ETFs) and longer-term bonds, with the latter aimed at pushing down long-term interest rates to encourage companies and individuals to borrow.

ETFs are similar to an index fund, but trade on the market like stocks.

The bank also pointed to an uptick in Japan's economy, which has suffered a mixed bag of data lately without any clear sign of a firm recovery.

The news out of Tokyo sent the dollar surging against the yen, providing a boost to Japan's exporters who have been struggling under the weight of a strong currency.

In afternoon forex trade, the dollar was up as high as 95.40 yen after the announcement, from 92.94 earlier in the day, while the euro also jumped to 122.31 yen from 119.39 yen.

Mitsubishi Heavy rose 4.60pc to 545 yen after a Nikkei business daily report that it had landed a joint contract to build four nuclear reactors in Turkey for $22 billion. (AFP)