HONG KONG: The yen soared against the dollar Thursday and Tokyo’s Nikkei index plunged more than 3.0 percent after the Bank of Japan shocked markets by not ramping up its stimulus.
Traders had widely expected the central bank to unveil fresh measures to shore up the world’s number three economy after this month’s deadly earthquakes in southern Japan and a string of weak data.
But it decided to stand pat, saying it wanted to gauge the effects of a negative interest rate policy introduced in January.
It also pushed back its timeline for hitting a 2.0 percent inflation target and once again lowered its forecasts for economic growth, citing weakness in overseas markets and the impact of two deadly earthquakes this month.
“It’s a total shock,” said Nader Naeimi, Sydney-based head of dynamic markets at AMP Capital Investors, said.
“From currencies to equities to everything you can see the reaction in the markets. I can’t believe this. It’s very disappointing.”
The greenback plunged to 108.09 yen at one point in the afternoon, sharply down from 111.78 yen earlier in the day, while the Nikkei stock index closed down 3.6 percent, having gone into the lunch break 1.4 percent higher.
Speculation had grown that the BoJ will act after the double earthquake in southern Japan, which led to the temporary closure of several factories and compounded problems for an already weak economy.
And on Thursday morning a slate of weak data on Thursday including the biggest fall in consumer prices for three years reinforced the struggle authorities have in kick-starting growth and igniting inflation in the country.
The bank’s edginess has also fuelled worries that it is running out of ideas on how to ramp up economic growth and spur price rises, with January’s negative rate move blasted as a desperate throw of the dice.
The news cast a pall over the region’s trading floors after a bright start that came in response to Federal Reserve’s positive outlook on the global economy.
Energy firms rise
Shanghai ended down 0.3 percent, Seoul lost 0.7 percent and Taipei shed more than one percent. Sydney added 0.7 percent and Hong Kong was 0.4 percent up in the afternoon, but its gains were sharply down from mid-morning levels.
After a much-anticipated policy meeting, the Fed decided against hiking interest rates and stood by its stance that any further rises would be slow and small as economic growth remained relatively weak.
However, its post-meeting statement suggested it was less concerned about the global economic outlook than it was at the start of the year when it cited turmoil in world markets for lowering its forecasts for rate hikes in 2016.
While analysts argued over what the Fed’s comments meant for the timing of its next rate rise, investors welcomed the prospect they will stay low well into the second half of the year.
The Dow and S&P 500 climbed, although the tech-rich Nasdaq was dragged down by weak earnings from Apple and Twitter.
Oil prices ended Wednesday at fresh 2016 highs after data showed US production had fallen in the week to Friday, which in turn boosted energy firms in Asian trade.
Sydney-listed Woodside Petroleum climbed one percent, while BHP Billiton was up 4.7 percent. In Hong Kong, PetroChina added two percent and Sinopec was 1.6 percent up.
Key figures around 0700 GMT
Tokyo – Nikkei 225: DOWN 3.6 percent at 16,666.05 (close)
Dollar/yen: DOWN at 108.15 yen from 111.47 yen
Shanghai – Composite: DOWN 0.3 percent at 2,945.59 (close)
Hong Kong – Hang Seng: UP 0.4 percent at 21,445.64
Euro/dollar: DOWN at $1.1337 from $1.1321 Wednesday
New York – Dow: UP 0.3 percent at 18,041.55 (close)
London – FTSE 100: UP 0.6 percent at 6,319.91 (close)
Copyright AFP (Agence France-Presse), 2016
Courtesy : BRecorder