Bank of Japan disappoints markets with modest stimulus, sending yen soaring and Asian stocks falling

People walk in front of the Bank of Japan headquarters in Tokyo on July 1.
People walk in front of the Bank of Japan headquarters in Tokyo on July 1. PHOTO: AFP

TOKYO (AFP) - The yen soared on Friday (July 29) and Asian stock markets slipped as the Bank of Japan's small adjustments to its stimulus programme disappointed traders who had expected a huge boost to its arsenal.

After weeks of anticipation that the central bank would pump fresh cash into the economy, policymakers said only that they would boost its exposure to riskier investments, leaving a massive 80 trillion yen (S$1.04 trillion) annual asset-buying programme unchanged.

"The BoJ decision failed to meet the market's high expectations," Khoon Goh, head of Asia research at Australia & New Zealand Banking Group in Singapore, told Bloomberg News.

He added that while governor Haruhiko Kuroda indicated the bank could unveil fresh measures at its September meeting, "overall this is a huge disappointment for markets".

The news sent the US dollar tumbling to below 103 yen from 104.20 yen earlier in the day, and well off the levels above 107 yen touched last week, while the euro fell to 114.29 yen from 116.60 yen. The Nikkei stock index was also hit, sinking 1.5 percent in the afternoon.

Among other markets, Sydney fell 0.3 per cent, Seoul sank 0.1 percent and Singapore tumbled 1.1 per cent. Hong Kong fell 0.8 per cent and Shanghai sank 0.1 per cent at the break, before the announcement.

The announcement came days after the government in Tokyo launched a fresh programme worth 28 trillion yen (S$360 billion) to kickstart the Japanese economy.

World markets soared in July as Britain's shock vote to leave sparked promises of support from central banks and governments in a bid to fend off a feared hit to the global economy.

The need for more support was highlighted Friday by data showing core Japanese consumer prices fell for a fourth straight month in June, the latest sign that Prime Minister Shinzo Abe's drive fire inflation is struggling to gain traction.

On oil markets both main contracts were headed for a seventh straight day of losses as worries about a global supply glut return to the fore.

Brent and West Texas Intermediate each lost 0.3 per cent and were headed towards the US$40 mark, well down from the 2016 peaks above US$50 at the start of June as the crucial US holiday driving season comes to an end and temporary disruptions to output in Canada and Nigeria ease.