Asia report: Most markets higher as Bank of Japan stands pat

Markets in Asia finished higher on Wednesday, after the Bank of Japan stood pat on interest rates but revealed it was to change the framework on which it bases its monetary policy.

Japan’s Nikkei 225 added 1.91% to close at 16,807.62, while the broader Topix rose 2.71% to 1,352.67.

The central bank kept its deposit rates on hold at -0.1%, while it revealed a new policy to target the yield curve and abandoned its monetary base target.

It said it will continue its programme of buying long-term Japanese government bonds so the balance of its holdings will increase by JPY 80 trn annually.

The yen did weaken immediately after the announcement, reaching near JPY 102.8 against the greenback, though it recovered and was last 0.09% weaker at JPY 101.79.

Japanese government bond yields rose briefly after the announcement, with the 10-year bond’s bid yield turning positive to 0.002%, before falling again to 0.025%.

The 30-year bond rose to 0.532% early on, before retreating back below 0.52% later in the afternoon.

Banks in Tokyo were sharply higher after the BoJ kept rates on hold - Mitsubishi UFJ was up 7.35%, Mizuho Financial added 6.83%, and SMFG closed 7.33% higher.

The major exporters were also higher, with Nissan up 1.44%, Sony adding 1.6% and Toyota 3.23% higher.

Analysts appeared to be initially disappointed by the Bank of Japan’s announcement, with Masaaki Kanno of JP Morgan saying the central bank was “not so serious” about its 2% inflation target.

“The BoJ appears to be more worried about the limits of the tools and the negative impact of the negative interest rate policy, although the bank will never accept this, at least officially.”

Japan’s Ministry of Finance could breathe a sigh of relief, with the Bank of Japan all but burying their disappointing data released before markets opened.

It said exports fell 9.6% year-on-year in August, a much larger drop than the 4.8% picked by economists.

Imports were down 17.3%, which was slightly narrower than the 17.8% decline estimated by the Reuters poll.

On the mainland, the Shanghai Composite was near flat, adding 0.08% to 3,025.48, while the Shenzhen Composite was up 0.27% at 2,005.59.

South Korea’s Kospi closed up 0.51% at 2,035.99, while Hong Kong’s Hang Seng Index was 0.59% higher at 23,669.90.

Oil prices were ahead in Asian trading, with Brent crude last up 1.78% at $46.71 per barrel and West Texas Intermediate adding 2% to $44.95.

The price rise came after the American Petroleum Institute released data showing a 7.5 million barrel drawdown in the week to 16 September.

Australia’s S&P/ASX 200 finished the day 0.68% higher at 5,339.60, with most sectors in the green - including the weighty financials and energy subindexes, rising 0.81% and 0.89% respectively.

New Zealand’s S&P/NZX 50 bucked the regional trend, however, falling 0.4% to 7,281.17 ahead of the Federal Reserve announcement, as well as the Reserve Bank of New Zealand interest rate announcement closer to home on Thursday.

Both down under dollars were stronger on the greenback, with the Aussie last ahead by 0.46% to AUD 1.3175 and the Kiwi strengthening by a more marginal 0.05% to NZD 1.3364 per $1.