Bank of Japan Confirms 2% inflation Target, Unlimited Asset Purchase Program

Nigel Thomas
22 Jan, 2013
New York City

Stocks in Tokyo traded volatile and shot up 1% after the Bank of Japan confirmed the inflation target revision to 2% and deferred unlimited bond purchase from January 2014. The yen traded higher.

[R]5:00 PM Tokyo – Stocks in Tokyo traded volatile and shot up 1% after the Bank of Japan confirmed the inflation target revision to 2% and deferred unlimited bond purchase from January 2014. The yen traded higher.[/R]

Stocks in Tokyo traded volatile and shot up 1% after the Bank of Japan revised its inflation target to 2% and said it will wait till 2014 before it starts its asset purchase program.

The central bank’s decision was widely expected but the market was surprised after the unlimited asset purchase program announced by the central bank.

The Bank of Japan said it plans to purchase 13 trillion or $110 billion of assets every month from January next year. The move fell short of market expectations and investors worried that the revised asset purchase program will rekindle inflation and weaken the yen enough.

In a joint statement with the government, the Bank of Japan said it revised its inflation target to 2% and it plans to target “monetary easing and aim to achieve this target at the earliest possible time.”

For the inflation target to 2%, Japan needs yen above 100 to a dollar, a wide gap from its current level.

The yen in chaotic trading closed at 88.84 after the Bank of Japan announcement but briefly traded above 90 to a dollar level.

The Nikkei 225 Stock Average slid 37.81 to 10,709.93 and the broader Topix Index fell 4.01 to 901.15.

Yield on 10-year Japanese government bonds were nearly unchanged and hugged near 0.730% level.

Stocks in Review

Aircraft component makers were in focus for the third week after the U.S. aviation regulator grounded the entire fleet of Boeing 787 Dreamliners.

GS Yuasa declined after a second investigation from Japanese regulator was commenced last week on the performance of lithium-ion battery.

GS Yuasa slipped 6 yen to 312 yen, IHI slid 3 yen to 236 yen and Fuji Heavy Industries fell 1 yen to 1,126 yen. All Nippon Airways Co added 1 yen to 180 yen.

Sharp Corp slumped 10 yen to 321 yen after Reuters reported that the company has halted the production of screens for iPads as Apple manages its inventory.

Toyota Motor Corp. dropped 40 yen to 4,240 yen and Honda Motor Co. declined 80 yen to 3,340 yen and Nissan Motor Co Ltd up 1 yen to 866 yen. Mazda Motor Corp closed unchanged at 217 yen.

Nippon Steel slid 2 yen to 228 yen and JFE Holdings Inc decreased 11 yen to 1,696 yen.

Shimano Inc dropped 30 yen to 5,750 yen.

Sony Corp gained 5 yen to 1,192, Canon Inc declined 55 yen to 3,275 yen and Nikon added 3 yen to 2,637 yen.

Nintendo Co. Ltd dropped 120 yen to 9,120 yen and Pioneer Corp. fell 6 yen to 218 yen.

Fanuc Corp. slumped 150 yen to 14,200 yen and Komatsu Ltd slipped 27 yen to 2,326 yen. Hitachi Construction Machinery Co lowered 4 yen to 1,909 yen.

Softbank Corp decreased 7 yen to 2,961 yen.

FamilyMart Co Ltd, the convenience chain operator closed unchanged at 3,580 yen and Lawson increased 10 yen to 6,210 yen. Ito En Ltd slipped 13 yen to 1,702 yen.

Seven & I Holdings Co dropped 22 yen to 2,661 yen. Fast Retailing Co. climbed 310 yen to 22,900 yen and J. Front Retailing Co. Ltd down 7 yen to 495 yen.

Mitsubishi UFJ Financial Group slid 1 yen to 472 yen and Sumitomo Mitsui Financial Group declined 45 yen to 3,255 yen. Dai-Ichi Life slipped 1.1% to 130,000 yen.

Nomura Holdings, Inc gained 5 yen to 489 yen on the worries that the stock has run ahead of its fundamentals.

Mitsui O.S.K. Lines, Ltd lowered 3 yen to 297 yen and Nippon Yusen K.K. down 4 yen to 216 yen.