Japanese Stock Futures Extend Drop as BOJ Keeps Policy Unchanged

  • BOJ refrains from adding to record monetary stimulus
  • Fed skips rate increase; Yellen cites Brexit as an uncertainty

Japanese stock futures extended declines as the yen surged after the Bank of Japan refrained from adding to monetary stimulus.

Nikkei 225 futures traded in Singapore dropped 2.1 percent to 15,575 as of 12:15 p.m. in Tokyo, after dropping 1.5 percent before the announcement. The underlying benchmark index was down 1.1 percent to 15,744.80 before the trading break, while the Topix index sank 1.2 percent to 1,261.67, poised for the lowest close since Feb. 12. The yen jumped 1.1 percent to 104.83 per dollar.

“There were some who had priced in possible easing,” said Norihiro Fujito, a strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “But with the Brexit vote looming next week, it was also possible that any effects from easing would only last a week.”

With the uncertain outlook for global markets giving reason for pause, the BOJ held its key interest rate at minus 0.1 percent and kept the annual target for expanding the monetary base at 80 trillion yen ($764 billion). Some 28 percent of 40 economists surveyed by Bloomberg had projected a change in stimulus, while 55 percent predicted a change in July, according to a Bloomberg survey.

The BOJ decision comes after the Federal Reserve refrained from raising borrowing costs this month, with Chair Janet Yellen citing uncertainty over the U.K.’s June 23 referendum on whether to stay in the European Union as a factor. The Japanese currency is trading at the highest in almost two years as the possibility of a Brexit has sparked a global selloff and surge in market volatility.

The Topix is down 18 percent this year, the second-steepest decline among developed markets behind Italy, as economic reports have deteriorated, stimulus from the Bank of Japan has backfired and the yen’s surge has pressured exporters.

All but one of the 33 industry groups on the Topix fell Wednesday.

  • Rubber producers led declines on the Topix, with Yokohama Rubber Co. falling the most on the Nikkei 225, sinking 5.7 percent
  • Exporters including carmakers and electric-appliance manufacturers dragged on the Topix the most, with the yen weighing on their profit outlook. Isuzu Motors Ltd. fell 2.9 percent and Nissan Motor Co. dropped 3.1 percent
  • Japan Steel Works Ltd. rose the most on the Nikkei, adding 2.2 percent

Futures on the S&P 500 Index fell 0.2 percent. The underlying U.S. equity gauge fell for a fifth day on Wednesday, the longest losing streak since February, erasing gains in a late-day selloff. The campaigns for and against keeping the U.K. in the EU laid out opposing visions of life outside the bloc on Wednesday as dueling ahead of next week’s referendum enters its final stretch.

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