The yen soared yesterday as the Bank of Japan’s small adjustments to its stimulus programme disappointed traders who had expected a huge boost to its arsenal.
However, Japan’s Nikkei index ended higher, with financials cheered that the bank did not cut borrowing costs further into negative territory, but most other regional markets retreated.
After weeks of anticipation that the central bank would pump fresh cash into the economy, policymakers said only that they would boost its exposure to riskier investments, leaving a massive 80tn yen annual asset-buying programme unchanged.
“The BoJ decision failed to meet the market’s high expectations,” Khoon Goh, head of Asia research at Australia & New Zealand Banking Group in Singapore, told Bloomberg News.
He added that while governor Haruhiko Kuroda indicated the bank could unveil fresh measures at its September meeting, “overall this is a huge disappointment for markets”.
The news sent the dollar tumbling to below ¥103 at one point from ¥104.20 earlier in the day, and well off the levels above ¥107 touched last week.
In the afternoon it was at ¥103.50, while the euro bought ¥114.51 from ¥116.60.
The Nikkei stock index sank almost 2% at one point but bounced back to end 0.6% higher. Among other markets Seoul sank 0.2% and Hong Kong was off 1% in the afternoon while Shanghai ended 0.5% down.
Singapore tumbled 1.2% but Sydney was up 0.1%. The BoJ announcement came days after the government in Tokyo launched a fresh programme worth ¥28tn to kick start the Japanese economy. World markets soared in July as Britain’s shock vote to leave sparked promises of support from central banks and governments in a bid to fend off a feared hit to the global economy.
The need for more support was highlighted Friday by data showing core Japanese consumer prices fell for a fourth straight month in June, the latest sign that Prime Minister Shinzo Abe’s drive fire inflation is struggling to gain traction.
Craig Erlam, senior market analyst, at OANDA, said: “Perhaps the days of investors looking to these central banks to provide a quick fix currency depreciation are broadly behind us and a new phase of constructive monetary easing combined with actual fiscal spending is what is needed.”
On oil markets both main contracts were headed for a seventh straight day of losses as worries about a global supply glut return to the fore. Brent and West Texas Intermediate each lost 0.5% and were headed towards the $40 mark, well down from the 2016 peaks above $50 at the start of June as the crucial US holiday driving season comes to an end and temporary disruptions to output in Canada and Nigeria ease.
In Tokyo, the Nikkei 225 up 0.6% at 16,569.27 points; Hong Kong — Hang Seng down 1.0% at 21,951.61 points and Shanghai — Composite down 0.5% at 2,979.34 points at the close yesterday.