Japan’s Nikkei Rallies as BOJ Maintains Dovish Stance (Update 1)

Reuters

13:17 JST, April 26, 2024 (updated at 16:00 JST)

TOKYO, April 26 (Reuters) – Japan’s Nikkei share average rallied on Friday after the Bank of Japan (BOJ) opted to leave interest rates unchanged, as widely expected, and said accommodative monetary conditions are likely to continue for the time being.

The Nikkei ended the day 0.8% higher at 37,934.76, extending a 0.4% rise from the morning session after the BOJ announced its policy decision during the midday recess.

During the session, the benchmark index gained more than 1% and topped the psychological 38,000 level, but failed to maintain the momentum.

The index still managed to advance 2.3% for the week, recouping a part of the previous week’s 6.2% tumble, its worst weekly performance since June 2022.

The broader Topix finished the day 0.86% higher, notching a 2.3% advance for the week.

The BOJ maintained its short-term interest rate target at a range of 0-0.1% in a unanimous vote, and issued fresh estimates projecting inflation to stay near its 2% target in the next three years.

At the same time, a much simplified statement format left some market participants wondering whether there was significance in the removal of a reference to buying Japanese government bonds at a pace of about 6 trillion yen ($38.5 billion) per month.

Investors are wary of hawkish signals from the central bank, potentially aimed at propping up the yen, which dipped to a fresh 34-year low of 156.215 per dollar after the BOJ’s announcement.

BOG Governor Kazuo Ueda is due to give a news conference at 0630 GMT.

“The market’s initial take is of a dovish BOJ,” said Shoki Omori, chief Japan desk strategist at Mizuho Securities.

“However, they changed their statement format and (as a result of that) it is very unclear what they will do in the future.”

Real estate vaulted to the top of the Nikkei’s best performing sectors on the outlook for extended low interest rates, with Mitsui Fudosan up 3.6%.

Tech continued to be a bright spot, tracking overnight gains in U.S. peers, with the Philadephia SE Semiconductor Index jumping nearly 2% even as Wall Street’s three main indexes declined.

Chip-making equipment giant Tokyo Electron climbed nearly 2% and startup-investor SoftBank Group gained 2.35%.

Shin-Etsu Chemical bucked the trend among semiconductor stocks, with the silicon producer diving more than 6% after announcing it would offer a hefty premium in a takeover offer for Mimasu Semiconductor Industry.

($1 = 156.0600 yen)