The Tokyo Stock Exchange opened slightly higher on Wednesday 18 January as all eyes are on the Bank of Japan (BoJ), whose monetary policy decision is expected around 12:00 local time (03:00 GMT). The flagship Nikkei index gained 0.36% to 26,231.90 points around 00:45 GMT, but the broader Topix index was close to breaking even (+0.03% to 1,903.55 points).
In recent days, speculation about a possible further adjustment by the BoJ has increased, following the surprise decision in December to raise the ceiling on 10-year Japanese yields that it tolerates. However, the BoJ had ensured that this adjustment was motivated exclusively by technical reasons and was not a first step towards a normalization of its policy, currently still ultra-accommodative despite the drastic monetary tightening implemented in the United States and Europe.
But many investors didn’t take his claims seriously, and the BoJ is finding it increasingly difficult to prevent Japanese 10-year yields from breaching their new 0.5% cap. If the path of monetary tightening in Japan continues, it could weigh down the Tokyo Stock Exchange and push the yen higher against other major currencies.
On the side of values
Banks: Shares of major Japanese banks suffered following the collapse of Goldman Sachs a day earlier on Wall Street after the US investment bank released quarterly results well below expectations. Mitsubishi UFJ Financial Group lost 2.78% to 924 yen, Sumitomo Mitsui Financial Group lost 1.57% to 5,432 yen and Mizuho lost 1.46% to 1,979 yen.
On the side of currencies and oil
The yen fell slightly against the dollar prior to the BoJ’s decision, with the dollar trading at 128.64 yen at around 0045 GMT versus 128.12 yen on Tuesday at 2100 GMT. The Japanese currency also weakened against the euro, trading at 138.75 yen versus 138.21 yen the day before. The European currency was stable against the greenback, trading the euro at 1.0786 dollars against 1.0788 dollars on Tuesday at 21:00 GMT.
The oil market continued its momentum after being buoyed a day earlier by hopes of a strong Chinese economic recovery this year: around 00:35 GMT the barrel of US WTI rose another 0.56% to 80, 63 dollars.