Japanese stockmarkets gained almost 5 per cent in reaction to the Bank of Japan’s decision to further expand its monetary policy measures.
In a statement the central bank announced it would accelerate the pace of increase in the country’s monetary base through asset purchases to approximately 80trn yen a year, up from its previous level of 60-70trn yen a year.
This will be achieved through purchases of Japanese government bonds (JGBs), while the central bank will triple its purchases of exchange traded funds (ETFs) and Japan real estate investment trusts (J-Reits).
Equity markets responded to the announcement with a sharp rally, with the Nikkei 225 index closing 4.83 per cent higher, while the Topix index rose 4.28 per cent.
Alex Treves, head of Japanese equities at Fidelity Worldwide Investment, said “risk of slowing inflation appears to have tipped [the BoJ’s] hand” following the recent fall in the price of oil.
Andrew Rose, manager of the Schroder Tokyo fund, said another factor in the ”abrupt about-turn” on policy was the “background of weaker-than-expected economic performance following April’s consumption tax increase.”
Managers said he announcement from the BoJ had come as a “surprise” because most people had pushed back expectations of any intervention into 2015.
But the announcment came on the same day the huge Japanese Government Pension Investment Fund (JPIF) confirmed rumours that it was planning to raise its weighting in Japanese equities from 12 per cent to 25 per cent, providing a double-boost for markets.
The negative impact on the Japanese economy of the consumption tax hike in the Spring had raised questions of whether the government would go ahead with a planned second hike in October 2015.
But Mr Treves warned that the intervention from the BoJ “suggests that they are intent on proceeding with the tax hike whilst mitigating the risks”.
