Nikkei Soars 4.8% on a Surprise BOJ Move to Expand Stimulus

Hiruki Nakamura
31 Oct, 2014
New York City

The Bank of Japan in a surprise move expanded its already large asset purchase program and stepped up its fight against entrenched deflationary forces. The BOJ also lowered its estimate for inflation. In addition, the GPIF announced its plan to increase allocation to stocks and alternative assets.

[R]4:30 PM Tokyo – The Bank of Japan in a surprise move expanded its already large asset purchase program as the central bank stepped up to fight entrenched deflationary forces. The BOJ also lowered its estimate for inflation. In addition, the GPIF announced its plan to increase allocation to stocks and alternative assets.[/R]

Bank of Japan in a surprise move announced to expand its asset purchase program to 80 trillion yen ($725 billion), up from its previous target between 60 trillion yen and 70 trillion yen.

The central bank also lowered its estimate of annual inflation for the next two years largely on the back of weak energy prices.

In addition, the government controlled pension fund, Government Pension Investment Fund, announced plans to invest in alternative assets and also put as much as half of all its assets in domestic and foreign stocks.

The GPIF is the largest pension fund in the world with 127.3 trillion yen in assets.

Japan''s central bank today unexpectedly increased the size of its monetary easing program to 80 trillion yen from 60 trillion yen to 70 trillion yen.

In economic news, the Bank of Japan showed annual core consumer inflation in September dropped for a second month in a row to 3% from 3.1% in August.

The central bank lowered its estimate for the core consumer price index, which excludes volatile food prices, to 1.7% for the fiscal year through March 2016 from 1.9% in July.

The BOJ cut its forecast for inflation largely on the weak oil price.

Average household spending declined 5.6% in September on year-over-year and unemployment rate climbed 3.6% compared to 3.5% in August.

The Ministry of Economy, Trade and Industry reported seasonally adjusted industrial production in September climbed 2.7% to 11.24 trillion yen following the 1.9% decline in August.

On a yearly basis, industrial production increased 0.6% compared to 3.3% drop in the previous month.

The Nikkei 225 Stock Average climbed 755.56 or 4.8% to 16,413.76 and the broader Topix index jumped 54.74 or 4.3% to 1,333.64.

For the week, Nikkei 225 surged 7.3% and for the month increased 2.1%.

The yen surged and closed at 111.60 against one dollar.

Stocks in Review

Hitachi Ltd climbed 4.7% to 859.10 after the electronics and equipment maker reported revenues in the second-quarter ending in September fell 1.1% to 2.39 trillion yen from 2.36 trillion yen a year ago period.

Net income in the quarter surged 185.2% to 62.67 billion yen compared to 21.97 billion yen and earnings per share jumped to 12.97 yen from 4.54 yen in the same period a year ago.

Mitsubishi Electric Corporation jumped 3.8% to 1,396.50 after the electrical and electronic equipment maker said net sales in the first-half ending in September climbed 9% to 1.97 trillion yen from 1.81 trillion yen a year ago period.

Net income in the period soared 102% to 97.8 billion yen compared to 48.3 billion yen and diluted earnings per share advanced to 45.58 yen from 22.52 yen in the same period a year ago.

The company lifted its full-year earnings forecast to 190 billion yen from 175 billion from previous guidance.

Mitsubishi Motors Corporation gained 2.5% to 1,133 yen after the passenger and sport car maker reported net sales in the second-quarter ending in September climbed 11.4% to 1.03 trillion yen from 929 billion yen a year ago period.

Net income in the quarter jumped 30.3% to 60.89 billion yen compared to 46.73 billion yen and earnings per share increased to 61.92 yen from 75.44 yen in the same period a year ago.

The automobile company lowered its sales forecast for the year to drop 5.2% to 2.18 trillion yen compared to previous guidance of 2.30 trillion yen.

Panasonic Corporation soared 3.3% to 1,305 yen after the audio and video equipment and household products maker reported group sales in the second-quarter ending in September slid 1% to 1.87 trillion yen from 1.88 trillion yen a year ago period.

Net income in the quarter tumbled 30% to 43 billion yen compared to 61.5 billion yen and diluted earnings per share declined to 18.60 yen from 26.61 yen in the same period a year ago.

Sony Corporation rose 0.8% to 2,072 yen after the consumer electronics products maker reported sales in the first-half ending in September climbed 6.5% to 3.71 trillion yen from 3.49 trillion yen a year ago period.

Net loss in the period widened to 109.2 billion yen compared to 16.50 billion yen and diluted loss per share dropped to 102.14 yen from 16.25 yen in the same period a year ago.

The company booked impairment charge on its mobile division of 176 billion yen or $1.58 billion.

Sumitomo Corporation jumped 2.6% to 1,176 yen after the international trading company said revenues in the first-half ending in September soared 7.7% to 4.17 trillion yen from 3.87 trillion yen a year ago period.

Net in the period swung to a loss of 38.40 billion yen compared to profit of 116.61 billion yen and diluted loss per share swung to 30.78 yen from earnings per share of 93.19 yen in the same period a year ago.

In the quarter, Sumitomo wrote down 167.3 billion yen the investments in the shale oil and coal.