Japan’s Nikkei Ends Higher after BOJ Holds Policy Steady; Banks Slide (Update 1)

Reuters

12:17 JST, June 14, 2024 (updated at 16:00 JST)

TOKYO, June 14 (Reuters) – Japan’s Nikkei share average ended higher on Friday after the central bank opted to leave policy settings unchanged, signaling that a decision on paring bond purchases would come next month.

The Nikkei finished the day 0.2% higher at 38,814.56. It had ended the morning session flat, with the Bank of Japan’s (BOJ) announcement coming during the midday recess.

The broader Topix extended morning gains to be up 0.5% at the close.

The Topix banking index shed early gains to close 0.5% lower, as the BOJ’s go-slow approach suggested an even longer period of ultra-low rates, which have crushed margins for lending and trading.

The decision to give “a sneak peek” at a bond purchase reduction due in July, rather than announcing a cut at the current meeting, “in itself reveals the BOJ’s cautious stance,” said Norihiro Yamaguchi, senior Japan economist at Oxford Economics.

For stocks though, “aside from the initial reaction, I think the impact will be small,” he said.

Investors went into the day keen to learn the fate of the central bank’s massive 6-trillion-yen ($38.14 billion) monthly bond-buying program, following reports from Reuters and other media that the BOJ could decide to pare purchases by about 1 trillion yen.

But while the BOJ said it intends to trim buying “to ensure that long-term interest rates would be formed freely in financial markets,” the statement added that the change would occur at the July meeting after discussions with market participants.

Focus now turns to BOJ Governor Kazuo Ueda’s news conference, scheduled for 0630 GMT.

Investors will be keen for hints on whether a July interest rate hike is on the table, following the first increase since 2007 in March.

Despite a decline in banking stocks, value shares outperformed on the day. The Topix’s value share sub-index rose 0.7%, compared with a 0.3% increase in growth stocks.

($1 = 157.3100 yen)