By Chao Deng and Brad Frischkorn
HONG KONG--Japanese markets were rocked Friday after the Bank of
Japan surprised investors by aggressively expanding its stimulus
measures, sending the yen plummeting to a near seven-year low and
boosting stocks.
The Nikkei Stock Average gained 4.8% to close at 16413.76, its
highest level in nearly seven years, and was back in positive
territory for 2014, after the central bank's move to add to Japan's
asset purchases, its main tool to spur higher inflation. The
unexpected move underscored how Prime Minister Shinzo Abe's
economic revival plan has gotten off track since a national sales
tax increase in April this year damped consumer spending.
The BOJ said it would buy more Japanese government bonds, and
triple the pace of its purchases of stock and property funds, to
help revitalize the sluggish economy.
"This is very much a shot in the arm for [Mr. Abe] to put his
policies on track," said Petr Kocourek, senior portfolio manager at
First State Investments in Singapore, who added that he sees more
upside for Japanese equities going forward.
With this move, "[Japan's] economy would be better able to
withstand the negative impact from a [second value added tax]" that
is expected to be announced in December, said William De Vijlder,
an economist at BNP Paribas.
Japan shares, which saw their strongest one-day move in over a
year, also got a boost from reports that Japan's $1.2 trillion
Government Pension Investment Fund's planned to slash its target
allocation for domestic bonds from nearly 60% to closer to half
that figure over the medium to long term.
The lower proportion of bonds was interpreted as meaning a
higher-than-expected stock allocation may be on the way. The GPIF's
actual figures--released after the market close--were in line with
the new market expectations; the fund said it would raise its
allocation to domestic stocks to 25% from 12% previously, and cut
its domestic bond allocation to 35% from 60%.
The U.S. dollar (USDJPY) rose to as high as Yen111.54 in Asia
trade, its strength a boon for Japanese exporters because it makes
goods sent overseas cheaper for foreign buyers. Late Friday in
Asia, it traded near its level in January 2008, and was at
Yen111.43, compared with Yen109.22 late Thursday in New York.
Stocks were higher across rest of the region, from Hong Kong,
where the Hang Seng Index was up 1.3% at 23998.06, to Australia,
where the S&P/ASX 200 was up 0.9% at 526.60.
Asian shares also got a boost after the U.S. Commerce Department
estimated on Thursday that U.S. economic growth was slightly better
than expected, at an annualized 3.5% for the July to September
period.
"Anything that helps to dispel fears that the U.S. economic
recovery is not on pace is encouraging for stock investors," said
Naoki Fujiwara, fund manager at Shinkin Asset Management.
China shares were up thanks to strong bank earnings. Bank of
China Ltd. was up 0.8% after it said that its third-quarter net
profit rose 5% on-year, and Agricultural Bank of China jumped 0.8%
after the lender announced a 6% gain in net profit over the same
period.
In Shanghai, stocks were up 1.2% to 2420.18, a fresh 20-month
high. The Shanghai Composite index gained more than 5% for the
week, its best week since February 2013.
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