Japanese Stocks Whipsaw After BOJ Unveils New ETF Buying Program

BOJ's Late Policy Move Roils Markets, Boosts Yen
  • Topix reverses gains after investors digest monetary statement
  • ETF purchases not as big as first thought, analysts say

Japanese stocks whipsawed as investors digested a Bank of Japan announcement that it will establish a new program for purchases of exchange-traded funds.

The Topix index jumped as much as 2 percent after the announcement, before resuming losses to be down 1.8 percent to 1,537.10 at the close in Tokyo, to cap a 0.8 percent weekly loss. The Nikkei 225 Stock Average slipped 1.9 percent to 18,986.80. The BOJ said a new ETF purchase program will have an annual budget of 300 billion yen ($2.5 billion) to offset any market impact as it resumes selling stock holdings in April. It will also extend the maturity of Japanese government bond holdings, it said in Tokyo.

“Investors are losing hope because the amount isn’t big,” said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd., which has $453 billion under management. “At first it seemed like the BOJ was progressing with easing, but when you look at what’s inside that, it’s nothing much. They’re focusing more on qualitative, rather than quantitative, easing.”

Topix soars then tumbles following BOJ decision
Topix soars then tumbles following BOJ decision

The central bank kept its main target for monetary stimulus of 80 trillion yen ($650 billion) a year in asset purchases unchanged, indicating confidence in the economy after data from capital spending to business confidence and unemployment exceeded expectations. The announcement follows this week’s decision by the Federal Reserve to raise U.S. interest rates for the first time in almost a decade.

The central bank said it will extend the average maturity of holdings of Japanese government bonds to between seven and 12 years, and also boost the amount it can purchase in Japanese real-estate investment trusts to 10 percent from the current 5 percent limit. It will also extend the time frame for selling the shares it purchases by five years, with the new deadline for completion being March 2026. The new ETF program will start from April, when the BOJ plans to resume selling shares it had purchased from banks.

“The BOJ is slightly expanding areas related to ETF and bond holdings, but investors are starting to see that the changes aren’t as big as they thought,” said Hiroaki Hiwada, a Tokyo-based strategist at Toyo Securities Co. “Investors were buying on hope. People are disappointed after looking at the details closely.”

Insurers and oil producers led declines among the Topix’s 33 industry groups, all of which fell. Energy explorer Inpex Corp. lost 2.6 percent. Japan Tobacco Inc. slumped 3.3 percent after Reuters reported the Children’s Investment Fund has sold most of its stake in the cigarette maker. 

Biggest Gains

Elderly nursing care operator Message Co. soared 21 percent after insurer Sompo Japan Nipponkoa Holdings Inc. confirmed reports it’s in talks to acquire the company. Kumiai Chemical Industry Co. jumped 10 percent after reporting profit that beat its forecasts.

E-mini futures on the Standard & Poor’s 500 Index slipped 0.4 percent after the underlying U.S. measure fell 1.5 percent on Thursday, halting its longest winning streak since October, as investors returned their focus to weakness in commodities and prospects for global growth. Oil closed in New York at the lowest level in almost seven years after U.S. crude inventories surged.

All but one of 42 economists surveyed by Bloomberg forecast that BOJ Governor Haruhiko Kuroda and his board wouldn’t expand stimulus on Friday. Analysts are divided on whether the BOJ will add to expand easing in 2016.

(An earlier version of this story was corrected to show direction of Fed move.)

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