Stimulus fails to lift Japanese equities

Tue, Jan 22, 2013, 00:00

Asian shares advanced amid optimism over the global growth outlook, but bold easing measures from the Bank of Japan (BOJ) failed to lift Tokyo equities and the yen rebounded from a brief sell-off as investors digested the central bank's actions.

The MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 per cent to a fresh 17.5 month high, while Australian shares ended little changed after touching a 20-month high earlier in the session. Hong Kong shares hovered around a 19.5 month peak and onshore China markets were on track to gain for a fourth-straight day.

The spotlight in Asia fell on the BOJ, which on Tuesday doubled its inflation target to 2 per cent and adopted an open-ended commitment to buy assets, surprising markets that had expected another incremental increase in its 101 trillion yen ($1.12 trillion) asset-buying and lending programme.

“A stronger Japan is good for the global economy," said Jeremy Friesen, a commodities strategist at Societe Generale in Hong Kong. He added the stimulus plan will be more positive for base metals than energy as Japan will be building infrastructure that will boost demand for metals such as zinc and copper.

The reaction in Japanese markets, however, reinforced market perceptions that the BOJ could have done more.

The yen rebounded from brief losses and the Nikkei turned down from an initial surge as investors digested the details, including the fact that the new scheme for additional purchases will only come into effect next year. Several analysts were also of the opinion the BOJ could have taken more steps, such as scrapping the 0.1 per cent floor for short-term interest rates and extending the duration of bonds the central bank buys.

Japan's benchmark Nikkei average surged as much as 0.8 per cent before giving up all gains to end down 0.4 per cent. Tokyo shares have been rising in tandem with the yen's slide against major currencies on expectations for bolder BOJ steps. The Nikkei tumbled 1.5 percent on Monday after investors booked profits from the index's 2.9 percent rally on Friday.

The dollar rose as high as 90.18 yen, but was last trading down 0.6 percent at 89.09 yen. It touched a fresh 2.5 year high of 90.25 on Monday. The euro rose to 120.18, before falling 0.5 per cent to 118.88 yen. The euro hit its peak since May 2011 of 120.73 on Friday.

Brent crude rose 0.3 per cent to $112.07 a barrel as the BOJ's latest easing action added to the recent positive data from the United States and China, while growing confidence in the strength of China's economic recovery pushed London copper up 0.7 per cent to $8,111.75 a tonne.

European markets are seen subdued, with financial spread-betters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX would open flat to down as much as 0.1 per cent. US stock futures were up 0.2 per cent, pointing to a firm Wall Street start.

Gold was up BY 0.2 per cent at $1,693.31 an ounce on the fresh round of easing from the BOJ.


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