Stocks soar as yen dives after BOJ stimulus

TOKYO – Japanese stocks soared as the yen dropped after the Bank of Japan (BOJ) doubled a growth funding facility, while sticking with its plan for unprecedented asset purchases.

The central bank doubled a growth funding facility to 7 trillion yen (S$86.5 billion) and said individual banks could borrow twice as much low-interest money as previously under another lending programme. The BOJ extended the timeframe of both programmes by a year, it announced at the conclusion of a two-day meeting yesterday.

It left unchanged a pledge to expand the monetary base by 60 trillion to 70 trillion yen per year.

The yen weakened to as low as 102.74 against the US dollar after the BOJ’s announcement and was trading at 102.54 at 4.15pm in Tokyo, down 0.6 per cent.

The Nikkei index jumped 3.13 per cent as the moves underscored Governor Haruhiko Kuroda’s stated commitment to do whatever is necessary to drag the nation out of 15 years of deflation.

“The doubling of the lending facility is seen as a dovish signal that the BOJ is prepared to ease further – that it’s committed to keeping liquidity extremely loose,” said Mr Izumi Devalier, a Japan economist at HSBC in Hong Kong.

At the same time, Japanese companies are already sitting on record stockpiles of cash, signalling limits on the likely benefits from expanding the lending programmes.

Japan’s economy grew at less than half the forecast pace in the fourth quarter, underscoring risks to recovery as a sales-tax increase looms in April.

Gross domestic product expanded an annualised 1 per cent from the previous quarter in the October- December period, figures showed on Monday, way below the 2.8 per cent expected by economists.

Prime Minister Shinzo Abe’s first two “arrows” of monetary and fiscal stimuli helped fuel four straight quarters of expansion. Investors are now waiting for him to flesh out his “third arrow” - measures to make it easier to do business in Japan.

His policies drove an 18 per cent slide in the yen against the US dollar last year, contributing to a 51 per cent jump in the Topix stock index. The benchmark is down 6 per cent this year ahead of the sales-tax increase.

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