Japan’s Nikkei Stock Average Pares Gains on Stronger Yen after BOJ Stands Pat

Reuters

13:33 JST, September 20, 2024

TOKYO (Reuters) – Japan’s Nikkei share average pared early gains amid a firmer yen on Friday, after the Bank of Japan kept its interest rates unchanged, as expected, and also upgraded its assessment on consumption.

The Nikkei share average .N225 rose 1.8% to 37,834.09 early in the afternoon session, after entering the midday recess up 2.1%.

The yen strengthened against the dollar to be about 0.3% stronger at 142.16, as of 0336 GMT, after initially shrugging off the policy decision, which came when stock and bond markets were in the trading break.

Benchmark 10-year Japanese government bond futures 2JGBv1 declined 0.08 yen to 144.58 yen. Cash bonds had yet to trade following the BOJ announcement.

The central bank judged that “private consumption has been on a moderate increasing trend,” a more optimistic assessment than the previous view that consumption was “resilient.”

Animal spirits have been the question mark for policymakers, with inflation tracking above the BOJ’s target for more than two years, but much of that due to import prices.

The focus now turns to BOJ Governor Kazuo Ueda’s news conference, due to start at 0630 GMT, after Japanese markets close.

He is likely to adopt a cautiously hawkish tone, rather than the “extremely hawkish” posture of the previous policy meeting, to avoid roiling markets, said Shoki Omori, chief Japan desk strategist at Mizuho Securities.

“Careful communication will be carried out to incorporate a rate hike in December or January,” Omori said.

“If the hawkish stance is clearly conveyed to the market, the USD/JPY exchange rate is expected to trend downward.”