The Bank of Japan (BOJ) yesterday surprised markets in adopting a zero-rate policy and announced further easing measures to help safeguard a fragile recovery from the threats of deflation and a strong yen.
The central bank lowered its key rate to a range of between zero and 0.1 percent in its first such move since it set the rate of 0.1 percent at the height of the financial crisis in December 2008.
It also announced an asset purchase scheme in an expansion of its efforts to combat the harmful strength of the yen and beat persistent deflation, having faced -increasing government pressure to do more to boost the economy.
Photo: Bloomberg
“It was a quite positive surprise,” said Masumi Yamamoto, equity market analyst at Daiwa Securities Capital Market.
“This signaled the Bank of Japan bowed to pressure from the government and took all the possible measures, which may actually create a new concern that the BOJ has no card left to play in its hands,” Yamamoto said.
In a unanimous vote, the central bank said it would “maintain the virtually zero interest rate policy until it judges ... that price stability is in sight.”
It added that it would examine establishing a temporary fund to buy around ￥5 trillion (US$60 billion) in financial assets such as government bonds, commercial paper, corporate bonds and exchange traded funds.
The central bank had earlier expanded a loan scheme enabling banks to borrow a total of ￥30 trillion from the central bank for a maximum of six months against pooled collateral.
“Although Japan’s economy still shows signs of moderate recovery, the pace of recovery is slowing down partly due to the slowdown in overseas economies and the effects of the yen’s appreciation on business sentiment,” it said.
The benchmark Nikkei share index jumped by about 1 percent on the surprise decision and closed up 1.47 percent. The headline Nikkei index ended at 9,518.76, up 137.70 points. The Topix index of all first section shares on the Tokyo Stock Exchange gained 1.20 percent, or 9.90 points, to 832.64.
The yen weakened to ￥83.99 against the US dollar from ￥83.55 earlier, before strengthening back to around ￥83.70.
“The central bank decided on easing measures on a scale and rate much bigger than the market had expected,” said Hideaki Inoue, chief forex manager at Mitsubishi UFJ Trust and Banking Corp.
However, he added the greenback’s gains were capped as markets also expect the US Federal Reserve to adopt further easing measures to shore up the US economy, which would soften the US dollar and complicate efforts to weaken the yen.
Japan stepped into the currency markets last month for the first time since 2004 in a bid to stem the yen’s strength after it hit a 15-year high against the US dollar and has repeatedly warned it is ready to do so again.
The strong yen has hurt exporters, making their goods more expensive and eroding companies’ overseas profits when repatriated.
Exports, a crucial driver for Japan’s growth, expanded at their slowest pace this year in August, as the impact of the yen’s strength and austere belt-tightening on overseas demand illustrated the risks threatening recovery.
Japan’s economy expanded by an annualized 1.5 percent in the period between April and June, sharply lower than the previous quarter’s 5 percent.
MediaTek Inc (聯發科) yesterday announced it would give incentive bonuses totaling NT$1.7 billion (US$59.7 million) to its employees and those at the firm’s major subsidiaries, after the smartphone chip supplier’s revenue hit US$10 billion last year. This is the biggest incentive bonus the Hsinchu-based handset chip designer has ever distributed in its 23-year history. About 17,000 full-time employees of MediaTek and five of its subsidiaries, including Richtek Technology Corp (立錡科技) and Airoha Technology Corp (絡達科技), would receive a “red envelope” of NT$100,000 each, the company said. “Surpassing US$10 billion is just the beginning. We will continue to [grow] on this basis,” MediaTek
TO SPUR REVENUE: The contract chipmaker expects its profit to grow 15 percent this year, outpacing the foundry industry’s projected advance of about 10 percent Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday raised its projected capital spending for this year by 62 percent, a new high, in an attempt to satisfy customer demand for advanced technologies in the production of central processing units, high-performance-computing (HPC) devices and 5G applications. After investing US$17.24 billion last year, TSMC this year plans to spend US$25 billion to US$28 billion on manufacturing equipment and new facilities, including a fab in the US. About 80 percent of the budget would be allocated for developing advanced technologies including 3, 5 and 7-nanometer technologies, the company said. The larger-than-expected capital spending prompted speculation
CHINESE TIE-UP: The firm said its services with Zhejiang Geely would be related to vehicles, parts, intelligent drive systems and automotive ecosystem platforms Apple Inc’s local manufacturing partner Hon Hai Precision Industry Co (鴻海精密), known as Foxconn Technology Group (富士康科技集團) outside of Taiwan, is setting up a vehicle venture, strengthening its automotive capabilities at a time when technology companies, including its California ally, are looking to expand in automaking. Hon Hai is joining forces with Chinese automaker Zhejiang Geely Holding Group Co (浙江吉利控股集團) to provide production and consulting services to global automotive enterprises, the companies said in a statement yesterday. The production and consulting services are related to whole vehicles, parts, intelligent drive systems and automotive ecosystem platforms, Hon Hai said in a filing with
RECORD BUDGET: TSMC does plan to raise its proposed capital expenditure a lot, and could benefit if Intel outsources more of its production to foundries, analysts said Intel Corp’s earnings conference call on Thursday is expected to clarify the US semiconductor giant’s outsourcing production plans, which would be crucial regarding Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) performance, analysts said. “TSMC stands to benefit if Intel outsources more of its fabrication to foundries,” SinoPac Securities Investment Service Corp (永豐投顧) analysts said in a note on Friday. Yuanta Securities Investment Consulting Co (元大投顧) was more cautious, saying that Intel’s contribution initially would be limited, but its outsourcing plans would still highlight TSMC’s leadership in technology, it added. “Intel will continue to manufacture server or high-end central processing units [CPUs], which have higher
RSS