Nikkei slides back as BoJ opts against further action

Japanese equities gave up nearly 200 points overnight as the Bank of Japan (BoJ) disappointed the market by opting to keep its monetary policy unchanged, failing to address concerns over bond market volatility.

Having leapt 5% yesterday on improved GDP figures, the Nikkei shed 1.5% this morning to close at 13,317 after the central bank announced its decision.

The BoJ’s April announcement of an ambitious asset purchase programme was accompanied by heightened volatility in the Japanese bond market, with yields on benchmark debt spiking from 0.3% to 1% before settling around their current level of 0.9%.

The bond market sell-off has pushed up mortgage rates and analysts’ fear borrowing costs could be next to be impacted, subsequently stunting economic growth.

Some BoJ members had considered shortening the bank’s fixed-rate short loan facility, to give bond markets a welcome boost, according to Bloomberg.

However, last night the BoJ refrained from expanding their tools to address bond-market volatility, arguing economic growth has not yet been impacted by the bond market sell-off.

Elsewhere in Asia, the MSCI index of Asia-Pacific shares ex-Japan hit a 2013 low, giving up 0.9%.


This article was first published on Investment Week


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