Japanese Stocks Follow U.S. Rally After Fed Interest-Rate Boost

  • Yen weakens for fourth day against the U.S. currency
  • BOJ expected to maintain stimulus at end of two-day meeting

Japanese stocks followed U.S. shares higher as the Federal Reserve signaled it won’t  rush into further rate increases after its first such move in almost a decade.

The Topix index added 1.6 percent to 1,564.71 at the close of trading in Tokyo for its biggest two-day gain since Oct. 1. All but one of its 33 industry groups rose. The Nikkei 225 Stock Average climbed 1.6 percent to 19,353.56. The yen weakened for a fourth day, after the U.S. central bank ended seven years of near-zero rates, boosting demand for the greenback. The Bank of Japan is expected to maintain its record stimulus at the end of its meeting on Friday.

“The first one is at least over. That’s a relief,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank Ltd in Tokyo. “The domestic situation in the U.S. looks good, and if the U.S. is strong, that’s positive for Japan.”

Volume was about 11 percent above the 30-day average on the Topix. Fishing and agricultural stocks, developers and food producers led gains among the industry groups. Sony Corp. jumped 2.4 percent after the Nikkei newspaper reported the electronics maker will produce batteries that allow phones to run 40 percent longer. Retailers rose, with department store operator Marui Group Co. adding 6.8 percent after data showed foreign visitors to Japan continued to surge in November.

E-mini futures on the Standard & Poor’s 500 Index slipped 0.4 percent after the underlying measure climbed 1.5 percent on Wednesday, extending its gains following the Fed move and pushing the equity gauge to its biggest three-day rally since Oct. 5.

‘Gradual’ Increases

The Fed raised rates in a widely telegraphed move while signaling that the pace of subsequent increases will be “gradual.” The Federal Open Market Committee unanimously voted to set the new target range for the federal funds rate at 0.25 percent to 0.5 percent, up from zero to 0.25 percent.

Policy makers separately forecast an appropriate rate of 1.375 percent at the end of 2016, the same as September, implying four quarter-point increases in the target range next year, based on the median number from 17 officials.

The action ends an era of unprecedented monetary stimulus that pushed stocks higher by more than 200 percent and added $15 trillion in value during the 6 1/2 year bull market. Investors will now find out how much stocks are worth in the absence of Fed support, and how high borrowing costs will be without the central bank stoking growth as aggressively.

Policy Divergence

The U.S. rate increase solidifies the Fed’s divergence from other major central banks, with policy makers in Europe and Japan still emphasizing measures to support growth. The BOJ began its two-day meeting Thursday in Tokyo.

Japan’s trade balance returned to a deficit in November after a surplus the previous month. November exports fell 3.3 percent on the year, more than economists estimated, while imports dropped 10 percent. That left a trade gap of 379.7 billion yen ($3.1 billion), Ministry of Finance data showed.

“There’s a sense of relief that they finally raised rates,” Chris Green, an Auckland-based strategist at First NZ Capital Group Ltd., a brokerage and wealth management firm, said by phone. “This is a net positive in terms of market sentiment. It’s removed the point of liftoff from the discussion, we’re over that hurdle. Now the question is: how gradual is that normalization profile and where do the risks lie.”

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