Nikkei Hits 34-Year High Amid Reappraisal of BOJ’s Policy Normalisation

Summary

  • The Nikkei rose by 1.77% marking the third consecutive day of gains, reaching a 34-year high of 35,049.86.
  • The broader index also increased by 1.57%, concluding at 2482.87.
  • Following the recent earthquake in western Japan, market participants are reconsidering the timeline for the Bank of Japan’s normalization of monetary policy.
  • Real wages of workers have continued to decrease for the 20th month in a row, causing uncertainty.
  • A weaker yen could potentially improve the profits of exporters.
  • Japanese stocks also benefited from positive movements on Wall Street.

Nikkei Indices Rise

The Nikkei experienced a 1.77% rise in its third successive day of gains, culminating at a nearly 34-year high of 35,049.86. This also indicates a trajectory towards the most significant weekly increase since the end of March 2020.

Besides, the broader index grew by 1.57%, finishing at 2482.87.

Monetary Policy Reconsideration

Fresh data about stunted wage growth and the impacts of the strong earthquake that occurred in western Japan are leading market analysts to reassess the timeline for when the Bank of Japan (BOJ) will realign its monetary policies, remarked Tony Sycamore from IG.

According to statistics unveiled last Wednesday, real wages of workers have decreased for the 20th consecutive month, defying official expectations of seeing wage increases before implementing policy tightening.

Impact on Currency and Export

The yen fell 0.9% against the U.S. dollar after the data was released and it was trading around 145.52 during Asian trading hours. A slump in yen tends to be favorable for exporter shares as it increases the value of overseas profits in yen when companies convert them back to Japan.

Stock Market Gains

Japanese stocks also enjoyed a boost from robust performances on Wall Street where megacaps rallied.

SMC Corp experienced a substantial 4.69% growth on Thursday, topping the list of winners. It was followed by Itochu Corp, with a 4.5% increase, and telecommunications firm KDDI Corp saw a rise of 4.21%.

Other noteworthy performers included Sony Group Corp, surging by 3.54% and Suzuki Motor Corp advancing by 3.86%.

Conversely, the largest percentage losses in the index were from Yamato Holdings Co Ltd with a drop of 3.85%, followed by Rakuten Group Inc, which fell by 2.44% and Tokyo Gas Co Ltd going down by 1.43%.

The shifts in Japan’s financial market can potentially impact forex trading trend and the value of assets such as stocks and commodities in the Japanese and global market.

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