Gains ease after market rally prompted by Japan stimulus

Julian Harris
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THE BANK of Japan’s (BoJ) decision to push its monetary easing programme above the $1 trillion mark saw global shares rally in early trading, although stocks later pared gains due to ongoing economic worries.

The announcement that a further 10 trillion yen (£79bn) will be added to the BoJ’s asset buying and loan programme initially sent the yen to a one month low against the dollar, yet it bounced back during the day’s trading.

The greenback jumped to 79.21 yen, its highest level since 22 August, after the news. Yet lingering concerns over the European debt crisis saw it sink back to around 78.41 last night.

And the euro itself hit a day high of 103.63 yen after the BoJ’s statement, yet dropped to 102.19 yen as risk aversion spread due to fears over Spanish reluctance to seek a bailout and activate more efforts by the European Central Bank (ECB) to bring down borrowing costs.

The BOJ said that it would lift asset purchases by 10 trillion yen, almost double what some had expected – to take the total size of its monetary easing programme to 80 trillion yen.

Japanese stocks rallied to a four-month high on the news, the Nikkei ending up 1.19 per cent. But the S&P Asia 50 index, which weighs stocks in Hong Kong, Korea, Singapore and Taiwan, was down 0.35 per cent.