BoJ Expands Asset Program; Nikkei Soars, Resona Plunges 16%

Marcus Jacob
05 Nov, 2010
New York City

Stocks in Japan soared after the Bank of Japan left its key rate on hold and expanded its asset purchase program to real estate and stocks. The move widely anticipated followed the monetary stimulus program in the U.S. Automakers advanced after Nissan lifted its annual net outlook.

[R]6:00 PM Tokyo – Stocks in Japan soared after the Bank of Japan left its key rate on hold and expanded its asset purchase program to real estate and stocks. The move widely anticipated followed the monetary stimulus program in the U.S. Automakers advanced after Nissan lifted its annual net outlook. Resona plunged 16%.[/R]

Stocks in Japan rose tracking the gains in world markets and the Bank of Japan left its key rate on hold.

The rate decision and bond program details were widely anticipated by investors and market indexes surged after the announcement. The central bank left its key rate near zero and also left its asset purchase program unrevised.

The central bank however, said it will buy Japanese real estate securities that are rated at least AA or higher and also invest in exchange traded funds that invest in two popular indexes. The decision of was widely anticipated and real estate securities have been on the rise in the last one month, just as intended by the central bank.

Japan has been struggling with falling asset prices including real estate and stocks valuations. The central bank’s willingness to broaden its asset purchase program to real estate may lift prices in the short term but its long term impact is not known.

Nikkei 225 Stock Average soared 2.9% to 9,625.99 and the wider Topix index gained 2.3%. For the week the Nikkei index is up 4.6% and the Topix has gained 3%. The Nikkei index is down 8.7% for the year and is the worst decliner among ten largest markets in the world.

Stocks on the Move

Automakers traded higher in Tokyo trading after stock Nissan lifted its annual earnings outlook. Nissan estimated fiscal full year net income to increased 80% to 270 billion yen. Toyota Motor Corp increased 1.9% and Honda Motor Corp gained 4.2%

Resona Holdings Inc plunged 16% or its daily limit of 100 yen. The company is looking to raise capital to meet its government loan obligations of 900 billion yen. The bank controlled by the government said in a filing that it plans to raise as much as 600 billion yen in a stock sale when the stock is at its low since 2003.

Mitsumi Electric Co. surged 7.3% to 1,441 yen after the electronic assemblies and components maker estimated narrower loss for the year to 1.5 billion yen from 3.7 billion yen a year ago.

Sumitomo Heavy Industries soared nearly 6% after the construction machinery maker lifted full year net outlook to 20 billion yen, an increase of 21% from a year ago. The dividend was lifted to 6 yen from5 yen.