Japanese stocks fell as the yen strengthened after the Bank of Japan (8301) doubled its inflation target while waiting until next year to start open-ended asset purchases like the ones already adopted by the Federal Reserve.
Exporters Honda Motor Co. and Canon Inc. fell more than 1.6 percent. Sumitomo Mitsui Financial Group Inc. dropped 1.4 percent to lead declines among Japan’s biggest lenders. Kirin Holdings Co. climbed 3.2 percent after a report the beverage maker may sell its stake in Singapore-based Fraser & Neave Ltd.
The Nikkei 225 Stock Average (NKY) retreated 0.4 percent to close at 10,709.93 in Tokyo after jumping as much as 1 percent immediately after the central bank’s the decision. Trading volume was 25 percent above the 30-day average. The broader Topix Index (TPX) lost 0.4 percent to 901.15. The yen gained 0.6 percent against the dollar.
“There are still a lot of skeptics,” said Stephen Corry, a Hong Kong-based chief investment strategist at LGT Group, a private bank and asset manager that oversees about $102 billion. “The big question now is will the combined fiscal and monetary stimulus work? The yen does look oversold and the Nikkei looks overbought.”‘
The Topix has risen about 25 percent since elections were announced on Nov. 14 on optimism the central bank would add to stimulus amid pressure from Prime Minister Shinzo Abe’s new government. The gauge is trading at 1.07 times book value, compared with 2.04 for the Standard & Poor’s 500 Index and 1.15 for the Stoxx Europe 600 Index.
Carmakers, banks and electronic appliance makers exerted the biggest drags among the Topix’s 33 industry groups.
Honda, which gets about 80 percent of its revenue outside Japan, lost 2.3 percent to 3,340 yen and was the biggest contributor to declines on the Nikkei 225. Canon fell 1.7 percent to 3,275. Sumitomo Mitsui, Japan’s second-largest bank by market value, fell 1.4 percent to 3,255 yen.
The BOJ doubled its inflation target to 2 percent, a result forecast by 21 of 23 economists surveyed Bloomberg News. The Bank also said it will shift next year to open-ended asset purchases like those announced by the Fed in September. Japan’s central bank said it will buy about 13 trillion yen ($145 billion) in Japanese government bonds and treasuries per month starting next January.
“There is little ‘bold’ here,” Julian Jessop, chief global economist at Capital Economics in London said in a note today. “It is debatable that the new ‘open-ended’ easing will result in any more asset purchases than would have happened anyway under the current policy.”
The yen rebounded from near its weakest level in 2 1/2. Japan’s currency has tumbled almost 17 percent in the past year, the biggest decline among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. A stronger yen cuts the value of earnings for Japanese exporters.
The 25-day historic volatility on the Nikkei 225 reached 21.88 today, its highest level since December 2011. The Nikkei Stock Average Volatility Index (VNKY) fell 6.6 percent to 22.48, indicating traders expect a swing of about 6.4 percent on the benchmark gauge over the next 30 days.
Among stocks that rose, Kirin gained 3.2 percent to 1,081 yen after Kyodo news reported the beverage maker may sell its 15 percent stake in Fraser & Neave. Kirin said it hasn’t made a decision on the sale. The Kyodo report was unattributed.
Fast Retailing Co. climbed 1.4 percent to 22,900 yen, giving the Nikkei 225 its biggest boost, after the Hong Kong Economic Journal reported its Uniqlo clothing unit may list shares in the city.
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