Japan's Nikkei hits record high, yen steady after BOJ hikes rates as expected

TOKYO: Japan’s Nikkei share average rose to a record high on Tuesday after the Bank of Japan raised interest rates, as had been widely expected, without signaling urgency for further tightening in monetary policy.

The yen maintained a slightly stronger tone against the dollar and Japanese government bonds slipped after the decision. The Nikkei gained 0.8% to 69,871.13 as of 0340 GMT, 10 minutes after reopening from the midday recess, touching 69,916.34 for the first time ever.

The broader Topix flipped from morning losses to edge up 0.2% at 4,007.36. The BOJ’s decision came during the trading break for stocks and bonds and had little initial effect on the yen, which remained around 0.1% firmer at 160.215 per dollar.

However, that was still on the weaker side of the 160-per-dollar level considered a line in the sand for intervention by Japanese officials.

“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.”

Benchmark 10-year JGB futures lost 0.28 yen to 127.98 yen.

The yield on the 10-year cash bond was 5 basis points higher at 2.625%.

Yields rise when bond prices fall.

Of the Nikkei’s 225 components, 83 rose versus 142 that fell, with some heavily weighted AI stocks having an outsized impact in buoying the market.

Chip-testing machinery makers outperformed, with Advantest gaining 5.1%, as did data centre plays, with Fujikura and Furukawa Electric up 9.9% and 7.5%, respectively.