Nikkei Rises and Yen Falls on Bank of Japan's Zero Interest Rate Policy
Japanese stocks rallied after the Bank of Japan announced it would slash its benchmark interest rate to near zero in an effort to revive its sluggish economy. This comes less than a month after the government intervened in currency rates, buying up dollars in an effort to curb the rise of the yen.
In another aggressive move, the BOJ will also set up a $60 billion fund to purchase government bonds as well as other assets. Now everyone's waiting to see how these steps will affect the value of the yen. So far, so good -- the yen slid to 83.68 per dollar today and investors gained confidence that Japan is working hard to address the situation. "This shows a commitment by the Japanese authorities to do whatever they can," one strategist at AMP Capital Investors told Bloomberg.
Japanese exporters, which make an immediate profit on a lower yen when they repatriate their earnings, rose dramatically. Fanuc, the industrial robot company, climbed 2%, Casio Computer gained 1.8%, Panasonic surged 1.9% and Sony advanced 1.4%. Tokyo Electron, a manufacturer of semiconductor equipment, rocketed up 4% after saying orders were up by 10% to 15% last quarter.
Some car companies made headway with Mazda rising 1%, Toyota inching up 0.4% and Honda adding 0.3%, but there were bigger rewards for makers of car components. Alps Electric, which provides electronics for vehicles, climbed 4%, Jtekt, a car parts division that's part of the Toyota Group, was up 1.4% and Asahi Glass rose 1.3%.
Japanese banking shares recovered today following yesterday's sell off. Mizuho Financial Group surged 3.6%, Sumitomo Mitsui Financial Group climbed 3% and Mitsubishi UFJ advanced 2.4%. Other financial companies also gained with Fukuoka Financial rising 3.4% and Chiba Bank up 2.7%.
In Hong Kong, property developers weighed heavily on the Hang Seng as investors took profits after recent gains. Cheung Kong tumbled 3% and Sun Hung Kai suffered a 2.4% fall. Both companies had been on a roll after racking up $1.4 billion in sales in new luxury properties over the weekend. Henderson Land slid 1.1%, Sino Land slipped 1% and New World Development lost 0.8%.
Other big losers included Belle International, the maker of trendy footwear, which slumped 4.2% and Ping An Insurance, which tumbled 3.6%. But the market was propped up by China Life Insurance, which racked up a 6.9% gain.