The stakes are running high for this week’s Bank of Japan (BOJ) meeting scheduled to begin tomorrow, Wednesday, and run through Thursday afternoon. Speculation as to the strategic financial changes to be instituted by the bank differs; however, a radical monetary policy that will put an end to two decades of deflation is expected.
Currently, the benchmark Nikkei stock index has surged 40 percent and the yen has tumbled more than 15 percent since mid-November on expectations for aggressive monetary easing. Global economists are expecting newly appointed BOJ Governor, Haruhiko Kuroda, to unveil drastic economic measures such as buying longer-term government bonds, boosting asset purchases and committing to the immediate open-ended purchase of assets.
In an effort to change the central bank's cautious approach and to adopt bolder measures that would end the deflation that has dogged Japan's economy for years, Kuroda told Japan's lower house of parliament that the BOJ would do "whatever it takes" to achieve its 2 percent inflation target which was adopted In January. Japan, the world's third largest economy, has suffered from continuous deflation and has slipped in and out of recession for many years.
As an indication that a degree of caution was setting into markets ahead of Thursday's BOJ decision, the yen on Tuesday rose to its highest level in about a month against the dollar and the Nikkei tumbled about 2 percent after data on U.S. manufacturing missed estimates
At the same time, other Asian stocks outside Japan rose on Tuesday. PetroChina Co., Asia’s biggest company by market value, added 2 percent as China’s oil consumption rose. Qantas Airways Ltd., the Australian airline gained 2.8 percent after saying Europe bookings jumped six-fold.
Excluding Japan, the MSCI Asia Pacific Index gained 0.3 percent to 473.07. With Japan’s losses, the Index gained less than 0.1 percent to 134.25 after falling as much as 0.8 percent. For the year, the MSCI Asia Pacific Index has gained 3.7 percent led by Japanese shares on speculation the nation will deploy more stimulus.
South Korea’s Kospi Index dropped 0.1 percent as international as March saw investors selling South Korean equities amid concerns the nation’s exporters will lose market share to Japanese rivals. Australia’s S&P/ASX 200 Index gained 0.2 percent as the Reserve Bank of Australia kept its benchmark interest rate unchanged.
On other Asian indices, Hong Kong’s Hang Seng Index was little changed and China’s Shanghai Composite Index fell 0.4 percent. Taiwan’s Taiex Index (TWSE) added 0.2 percent. Singapore’s Straits Times Index gained 0.1 percent. Markets in Australia, New Zealand and Hong Kong reopened today after a four-day weekend.