Bloomberg News

Japan Stocks Swing Between Gain, Loss Before BOJ Decision

January 21, 2013

Japanese stocks swung between gains and losses before the Bank of Japan (8301) decides whether to yield to Prime Minister Shinzo Abe’s demands for increased economic stimulus and a doubling of its inflation target.

GS Yuasa Corp. lost 0.6 percent as it faces a second government probe into batteries for Boeing Co.’s 787 Dreamliner fleet. Kirin Holdings Co. climbed 4.2 percent after a report it may sell its stake in Fraser & Neave Ltd. Fast Retailing Co. climbed 1.6 percent after the Hong Kong Economic Journal reported its Uniqlo clothing unit may list shares in the city.

The Nikkei 225 Stock Average (NKY) slipped 0.4 percent to 10,705.53 as of the 11:30 a.m. trading break in Tokyo after gaining 0.5 percent earlier. Volume on the Nikkei 225 was about 10 percent below the 30-day intraday average ahead of the BOJ decision.

“The focus is on the BOJ decision,” said Takashi Miyazaki, a senior strategist who helps oversee about $70 billion at Mitsubishi UFJ Asset Management Co. in Tokyo. “A lot of the expectation has been priced into stocks already. If the results fall below expectations then we’ll likely see a correction, but the long-term trend is still up and investors who were late in buying may support the market going forward.”

The broader Topix Index (TPX) retreated 0.5 percent to 900.6, erasing earlier gains of 0.3 percent. Japan’s broadest equity measure has risen about 25 percent since elections were announced on Nov. 14 on optimism Prime Minister Shinzo Abe’ new government will pressure the central bank to add economic stimulus.

Economists’ Estimates

All 23 economists in a Bloomberg News survey said the BOJ will announce additional asset purchases at the end of a two-day meeting today, with a median estimate for a 10 trillion yen increase. The BOJ will adopt Abe’s desired 2 percent inflation target, all but 2 of the economists said.

“There’s a lot riding on the Bank of Japan meeting today,” Shane Oliver, Sydney-based head of strategy at AMP Capital Investors Ltd. told Bloomberg Television. The firm manages about $126 billion. “The change of economic policy in Japan, the switch to much easier monetary policy, is a huge positive.”

The Topix Index last week capped its longest weekly winning streak since 1986. The Tokyo Mothers Index (TSEMOTHR) of emerging companies yesterday recorded its highest close since March 9, 2011, before a record earthquake and tsunami devastated northern Japan.

The Nikkei Stock Average Volatility Index fell 5 percent to 22.87, indicating traders expect a swing of about 6.6 percent on the benchmark gauge over the next 30 days. The Topix is trading at 1.07 times book value, compared with 2.04 for the Standard & Poor’s 500 Index and 1.6 for the Stoxx Europe 600 Index.

To contact the reporter on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net


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