Japanese and European shares soared yesterday after Tokyo launched a massive stimulus package to kick start the economy, but other Asian markets were more subdued as the Federal Reserve wraps up a key policy meeting.
Prime Minister Shinzo Abe unveiled the ¥28tn ($266bn) programme days before the Bank of Japan holds its own meeting that is widely expected to see it loosen monetary policy.
Abe had promised to ramp up spending on the stuttering economy following Britain’s shock vote to leave the EU and a landslide parliamentary election win earlier this month that bolstered his power.
Promises of support from governments and central banks around the world since the Brexit ballot last month have provided the foundation for big gains across equities markets in recent weeks.
“It seems big and it should probably do quite a bit for the Japanese economy.
Whether it’s big enough, we’ll find out.
The markets seem to be a little bit undecided whether it is or it isn’t,” Lothar Mentel, chief investment officer at Tatton Investment Management, told Bloomberg TV.
Tokyo stocks ended the day 1.7% higher while the dollar rose to ¥105.70 from ¥104.64.
The BoJ ends its gathering on Friday and is widely tipped to unveil fresh stimulus as the world’s number three economy struggles and inflation is virtually non-existent.
But while expectations of new measures have boosted Japanese stocks and sent the yen tumbling — helping exporters — analysts warned of a sharp sell-off if policymakers disappoint.
“The key is whether the BoJ will surprise us again on Friday,” said Alex Wong, director of asset management at Ample Capital in Hong Kong.
It “has surprised the market several times in the past few years so they are a little bit unpredictable. There may be a disappointment” if the BoJ fails to deliver extra stimulus, he added.
The immediate focus is now on the Fed, which ends its meeting later Wednesday.
While it is not expected to announce any new policy measures, dealers are keen to see its appraisal of the US economy and plans for interest rates in light of a string of positive data, including on jobs.
“In all likelihood, the Fed may take a cautious stance highlighting Brexit concerns, but there is certainly some scope for (it) to lean hawkish,” said Stephen Innes, senior trader at OANDA Asia Pacific.”If not for Brexit and an outlier May (jobs report), the Fed may very well have pulled the trigger (in June).
“Since then, employment data has recovered and the US economic prints continue to beat expectations, providing the (Fed) with more than enough ammunition to provide some straight forward guidance of an impending rate hike.”
While the Nikkei soared, other markets stuttered.
Hong Kong ended 0.4% up and Sydney was marginally higher.
Seoul and Wellington each dipped 0.1%.
Shanghai tumbled 1.9% following a report that China’s banking regulator was considering clamping down on the nation’s multi-trillion-dollar wealth management products market.
The 21st Century Business Herald said among measures being considered by the China Banking Regulatory Commission were limits on equities investments.
Regional suppliers of Apple were broadly higher after the US giant reported better-than-expected earnings for the fiscal third quarter and projected above-estimate income for the next three months.
Japan Display rose 1.6% in Tokyo, while Taipei-listed Hon Hai Precision added 1.4% and LG Display in Seoul gained 4.1%.
In Tokyo, the Nikkei 225 up 1.7% at 16,664.82 points; Hong Kong — Hang Seng up 0.4% at 22,218.99 points and Shanghai — Composite down 1.9 points at 2,990.00 points at the close yesterday.