Bank of Japan set to ease monetary policy further

Asian shares rose on Monday after a weaker-than-expected US jobs report prompted investors to trim expectations that the Federal Reserve would rise interest rates as early as this month. MSCI’s broadest index of Asia-Pacific shares outside Japan extended early gains and was up 1.4 per cent by midday.

Japan’s Nikkei stock index surged 1.1 per cent to three-month highs even as the dollar slipped against the yen despite Bank of Japan governor Haruhiko Kuroda’s signal that the Bank of Japan stands ready to ease monetary policy further.

US stock futures edged up 0.2 per cent, though US stock and bond markets will be closed on Monday for the Labor Day holiday.

Friday’s US jobs report showed non-farm payrolls rose by 151,000 jobs in August after an upwardly revised 275,000 increase in July. Economists polled by Reuters had expected a rise of 180,000.

"What matters is not whether the markets think that was a strong jobs number, but whether Fed policymakers do," said Mitsuo Imaizumi, chief currency strategist at Daiwa Securities in Tokyo, who noted that Fed vice-chairman Stanley Fischer said late last month that the US job market was close to full strength.

Markets were also keeping watch on the two-day summit of leaders from G20 nations in Hangzhou, China.

Global economy

Chinese president Xi Jinping said at the opening of the summit on Sunday that the global economy was being threatened by rising protectionism and risks from highly-leveraged financial markets. The dollar fell 0.3 per cent to 103.66 yen, giving back some of its gains after rising as high as 104.32 on Friday, its highest since July 29th.

The Bank of Japan’s Kuroda told a seminar on Monday that the central bank’s comprehensive review of its policies this month would not lead to a withdrawal of easing. He shrugged off growing market concerns that the bank is reaching its limits, and stressed that the Bank of Japan had room to deepen negative rates even as he acknowledged that that policy had its own risks.

“There is no free lunch for any policy. That said, we should not hesitate to go ahead with [additional easing] as long as it is necessary for Japan’s economy as a whole.”

Asset-buying

The euro rose 0.1 per cent to $1.1164 ahead of Thursday’s

European Central Bank

interest rate decision. Most economists expect the central bank to hold policy steady, although some believe the ECB could extend its asset-buying programme.

The Reserve Bank of Australia will also issue a policy decision on Tuesday. All 33 economists polled by Reuters expected a steady outcome, with financial markets pricing in the smallest of chances for a cut.

Crude prices inched down, paring their robust gains in the previous session amid worries over a global oil glut. Brent crude was down 0.6 per cent at $46.55 a barrel, while US crude slipped 0.6 per cent to $44.16.

Both had gained 3 per cent in the previous session as the dollar slipped after the employment data, making oil cheaper for investors holding other currencies. But for the week Brent fell 6 per cent, its biggest drop in five weeks, while US crude fell nearly 7 per cent for its largest decline in eight weeks. – Reuters