Tokyo led most Asian equities higher and the yen fell after Japan’s central bank adjusted its stimulus programme, giving world markets a healthy start on what has been dubbed “Big Wednesday”.
The Nikkei sprang from negative territory to end 1.9% higher after the Bank of Japan said it would aim to raise government bond yields as part of its drive to kickstart inflation.
It also said it would continue its huge monetary easing scheme and delayed cutting interest rates further into negative territory – providing some much-needed relief for banks, which have been hammered by the policy introduced earlier this year.
“The BoJ’s decision to steepen the yield curve showed they are taking into account the situation of financial institutions,” Takeshi Minami, chief economist at Norinchukin Research Institute, told Bloomberg News.
The dollar soared to 102.30 yen from 101.69 yen in the morning and 101.72 in New York, while the euro was at 114.10 yen from 113.50 yen earlier.
The announcement came at the end of a keenly-awaited meeting and follows a string of weak readings on the economy, which has failed to revive despite three years of bank and government stimulus.
Later in the day the US Federal Reserve will wind up its own policy meeting, which analysts are calling the biggest for years.
Global markets have suffered severe volatility in the weeks leading up to the gathering, with Fed officials giving contradictory opinions on the need for a rise in interest rates.
While it is not expected to tighten this month, the policy board’s statement will be pored over for clues about its plans for its next meeting in December, or
January.
Predictions of tightening US rates and a lack of recent easing from other central banks have fuelled debate that the age of easy money – which has helped fuel a rally on global markets – could be ending. This has sparked fears of a painful correction.
The bank of Japan decision was being carefully watched on Asian trading floors, where Hong Kong rebounded from early losses to sit 0.8% higher in the afternoon and Shanghai ended up 0.1%.
Sydney added 0.7% and Seoul gained 0.5%, while Taipei put on 0.7%. However, Singapore and Wellington were slightly lower.
oil prices climbed for a second day as traders await the release of US stockpiles data, while also having one eye on next week’s meeting of top producers that will discuss a global supply glut and overproduction.
West Texas Intermediate for November delivery, a new contract, was 91 cents higher at $44.96 and Brent was up 72 cents at $46.60. News that Libya had finally shipped its first cargo of crude since 2014 from its Ras Lanouf port had little immediate effect on prices. The shipment was meant to have left Sunday but was delayed by unrest.
“The amount of oil coming out of Libya is fairly limited so it won’t have a material impact on crude prices today,” OANDA senior market analyst Jeffrey Halley said.