TOKYO: Japan’s Nikkei share average rose to a record high on Tuesday after the Bank of Japan raised interest rates as widely expected, without signalling urgency for further tightening in monetary policy.
Japanese government bonds slid after the decision to raise the key rate by a quarter point to 1 percent, while the yen remained largely flat at around 160 per dollar, a level that traders see as a line in the sand for currency intervention by Japanese officials.
The Nikkei ended the day with a 0.1 percent gain to close at 69,404.50, although it earlier jumped as much as 1 percent to reach 70,020.68 for the first time.
The broader Topix, however, lost 0.2 percent on the day to finish at 3,991.14, after initially flipping to gains following the policy announcement, but then retracing that advance.
“Price rises are broadening, and there is a risk that underlying inflation may deviate from our target,” whereas “the risk of a sharp deterioration in the economy has diminished,” BOJ Deputy Governor Shinichi Uchida said at a news conference that began at the same time the stock market closed. He said there was no proposal for a half-point rate hike at the meeting.
The BOJ’s decision to raise rates for the first time since December came during the trading break for stocks and bonds, and had little initial effect on the yen. Japan’s currency oscillated in a narrow range slightly on the weaker side of 160 per dollar, last changing hands at 160.32.
“The BOJ delivered what markets expected,” said Charu Chanana, chief investment strategist at Saxo. “But the reaction shows this was not hawkish enough to force a major yen repricing.”
The central bank “is still moving in a very gradual way and continues to say financial conditions will remain accommodative,” she added. “This is mildly supportive for Japanese equities because the BOJ is tightening, but not in a way that threatens liquidity or earnings.”
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