Traders work at the Hong Kong Stock Exchange. Shares closed down 0.79% yesterday.

AFP/Tokyo

Japan’s central bank yesterday slashed its growth forecasts and put back an inflation timetable as the country’s economy stutters, but its decision to hold off any fresh stimulus sent the yen up and Tokyo stocks rallying.
Economists had come to a broad consensus the Bank of Japan would lower its expectations for the world’s number three economy following a string of weak data, including on trade, manufacturing and investment.
The decision not to further loosen monetary policy came after the European Central Bank indicated it could ramp up its own programme in December while China last week slashed interest rates for a sixth time in a year.
And on Wednesday the Federal Reserve suggested it would raise US interest rates, confounding expectations it would delay a move until the New Year owing to a weak global outlook.
The BoJ forecast growth to come in at 1.2% in the fiscal year to March 2016, down from an earlier 1.7% projection. It also expects to hit its 2.0% inflation target in the six months ending March 2017 - about half a year later than previously expected.
It said the revision was “due to the flattening of exports against the background of the slowdown in emerging economies and to the sluggishness in private consumption”.
After more than two years of huge government spending and BoJ bond-buying stimulus—pushed by Prime Minister Shinzo Abe—the Japanese economy is still unable to gain traction and inflation remains anaemic. The tepid readings have brought into question Abe’s growth blitz.
Earlier yesterday official data showed consumer prices fell in September while household spending also retreated. The figures follow a string of downbeat indicators that have fanned calls for the BoJ to add to the stimulus.
The yen surged on the decision to hold off more stimulus—which effectively prints more cash—but it retreated later as traders bet the bank would eventually pull the trigger at some point.
“I don’t think this is the end—expectations for easing will be carried over to coming months,” Daiju Aoki, an economist at UBS Securities Japan, told Bloomberg News.
In Tokyo trade the dollar bought ¥120.75 from ¥121.10 Thursday in New York—having tumbled to as low as ¥120.34 after the announcement.
The euro was at ¥132.77 against ¥132.96 in US trade. It fell to ¥132.36 at one point yesterday.
Despite the decision to stand pat, the Nikkei stock index ended 0.78% higher.
“There were some investors that were hoping for expansion, but I don’t think it’s a negative surprise,” Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank, said.
However, other Asian markets retreated, with the Fed’s suggestion that it could hike rates this year weighing on sentiment.
Hong Kong finished 0.79% lower while Sydney, Seoul, Wellington and Taiwan all finished in the red.
Shanghai lost 0.14% as investors fret over a weak season of Chinese corporate earnings.
Emerging market currencies mostly advanced against the dollar, having retreated Thursday on the Fed announcement.
The South Korean won gained 0.15%, Thailand’s baht added 0.22% and the Singapore dollar was up 0.20%.
The Indian rupee, Taiwan and Australian dollars also advanced but there were small losses for Indonesia’s rupiah. The Malaysian ringgit recovered from early losses to sit 0.05% up in late trade.
Wall Street provided a soft lead with dealers virtually unmoved by a Commerce Department report showing third-quarter US economic growth slowed to an annual rate of 1.5%, in line with expectations, from a 3.9% pace in the second quarter. Some aspects of the report were solid, including a 3.2% rise in consumer spending.