Tokyo shares dropped on Friday after two days of gains, hit by weak oil prices and disappointment with the Bank of Japan’s unexpected tweaks to its stimulus program.
News that the bank had tinkered with policy came as a surprise to markets, which initially surged as investors had expected it to stay its hand for now.
The benchmark Nikkei 225 index briefly rallied more than 2 percent — it was in negative territory during morning trade — as the yen sharply weakened, boosting exporters.
However, the rally quickly faded and the Nikkei ended down 1.9 percent, or 366.76 points, to close at 18,986.8.
The Bank of Japan said it would spend an additional ¥300 billion (US$2.5 billion) for exchange traded fund (ETF) purchases on top of the ¥3 trillion it already spends each year.
Japan’s TOPIX index jumped as much as 2 percent on the news, only to drop 1.8 percent at the close as investors took a closer look at the Japanese central bank’s plan.
“This is unexpected, but compared to the previous so-called QQE [quantitative and qualitative easing], the size is considerably different,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd.
“At ¥300 billion, it’s on the scale of margin of error. The impact to the stock market will not be big,” Monji said.
At ¥300 billion, it is just a 10th of the size of the bank’s current ETF efforts, and intended to offset the market impact as the Bank of Japan resumes selling from April of stocks it purchased from financial institutions.
Friday’s action was not additional monetary easing in response to downside market risks, Bank of Japan Governor Haruhiko Kuroda said at a briefing in Tokyo after the two-day meeting.
The Japanese central bank kept its main target for monetary stimulus unchanged, indicating confidence in the economy after data from capital spending to business confidence and unemployment exceeded expectations.
The move follows the Fed’s decision this week to tighten monetary policy, solidifying its divergence from other major central banks as policymakers in Europe and Japan emphasize measures to support growth.
Hong Kong stocks ended the week on a negative note, as a two-day rally spurred by the US Federal Reserve’s interest rate hike faded, while Shanghai also closed marginally lower.
The benchmark Hang Seng Index dipped 0.53 percent, or 116.5 points, to close at 21,755.56.
The regional benchmark index pared this week’s gain to less than 0.1 percent after jumping 3 percent over the previous two days in response to the Fed’s first raised interest rates in almost a decade.
In Shanghai the benchmark composite index gave up early gains to end marginally lower, losing 0.03 percent, or 1.04 points, to 3,578.96. It added 4.2 percent over the week.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, slipped 0.28 percent, or 6.58 points, to 2,335.6 — though it has gained 6.36 percent since Friday last week.
The TAIEX slipped 0.8 percent.
Singapore’s Straits Times Index declined 0.5 percent, while South Korea’s KOSPI lost 0.1 percent.
Australia’s S&P/ASX 200 Index added 0.1 percent and New Zealand’s S&P/NZX 50 Index increased 0.3 percent.
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