Japan Stocks surge on Fed's corporate debt-buying program

Japan share market finished session sharp higher on Tuesday, 16 June 2020, marking its first rise in four trading sessions, as the formal start of the Federal Reserve's corporate bond buying programme boosted global risk sentiment and calmed earlier worries about a second wave of coronavirus infections. Sentiment was also boosted by the Bank of Japan increase in the nominal size of its lending packages for cash-strapped firms to $1 trillion from about $700 billion announced last month.

At closing bell, the 225-issue Nikkei Stock Average surged 1,051.26 points, or 4.88%, to 22,582.21. The broader Topix index of all First Section issues on the Tokyo Stock Exchange spurted 62.67 points, or 4.09%, at 1,593.45.

 

Investors' buying appetite was aroused by a climb in U.S. stocks on Monday, thanks to the Federal Reserve's announcement that it will buy individual corporate bonds as a coronavirus response measure.

The Federal Reserve said on Monday that it would begin to buy debt issued by individual corporations based on a broad index of corporate bonds in the United States, a new step in the central bank's efforts to keep credit flowing freely amid the coronavirus pandemic. Officials voted unanimously to expand the so-called Secondary Market Corporate Credit Facility, which it unveiled in May. The program is meant to allow companies to continue borrowing money at a time of high stress on the financial system following the steep economic decline from the pandemic.

All of the Tokyo Stock Exchange's 33 industry subindexes firmed, with iron and steel, marine transportation and transportation equipment issues comprising those that gained the most.

Megabank group Mitsubishi UFJ Financial Group Inc., insurer Dai-ichi Life Holdings Inc. and other financials attracted buying on the back of rises in the U.S. peers the previous day. Mitsui Chemicals Inc., Sumitomo Chemical Co., Asahi Kasei Corp. and Tosoh Corp. rose, in response to Mitsubishi UFJ Morgan Stanley Securities Co.'s upward revisions to its target stock prices for the chemical firms. On the other hand, a handful of losers included pay parking lots operator Park24 Co. and lactic beverage maker Yakult Honsha Co.

ECONOMIC NEWS: BOJ Keeps Interest Rates Unchanged- The Bank of Japan Policy Board voted 8-1 to retain the interest rate at -0.1% on current accounts that financial institutions maintain at the central bank. The bank will continue to purchase a necessary amount of Japanese government bonds without setting an upper limit so that 10-year JGB yields will remain at around zero percent. The central bank has raised the size of the coronavirus lending program to JPY 110 trillion from JPY 75 trillion. The credit easing measures implemented included purchasing corporate debt and lending measures to support small businesses and households. The bank added that the Japanese economy is likely to remain in a severe situation for the time being due to the impact of COVID-19 at home and abroad. The BoJ reiterated that its policy interest rate would remain at present or lower levels. Also, the bank said it would closely monitor the impact of COVID-19 and is prepared to take additional easing measures if necessary.

CURRENCY: The Japanese yen traded at 107.38 per dollar after seeing highs around 107.1 yesterday.

Powered by Capital Market - Live News