Japan's Nikkei gains as financials rally after BOJ tweak

Panasonic Holdings

31/10/2023 06:28

By Kevin Buckland
       TOKYO, Oct 31 (Reuters) - Japan's Nikkei share average
gained on Tuesday after the Bank of Japan (BOJ) added more
flexibility to its yield curve control, but kept the stimulative
policy in place.
    The stock benchmark  .N225  closed 0.53% higher at
30,858.85. 
    The broader Topix index  .TOPX  rallied 1.01%.
    Financial stocks were big winners, with the Tokyo Stock
Exchange's (TSE) insurer  .IINSU.T  subindex climbing 2.65% to
lead gains among the 33 industry sectors. The banking  .IBNKS.T 
subindex gained 2.21%.
    Higher long-term yields and a steeper yield curve improve
the outlook for returns from lending and investing.
    For Japanese equity investors, the BOJ found a sweet spot by
making the 1% ceiling for 10-year Japanese government bond
yields a reference point instead of a hard cap.
    "The BOJ is taking the 'softly, softly' approach here," said
Kyle Rodda, a senior markets analyst at Capital.com in
Melbourne.
    "The incrementalism was perhaps a surprise to markets given
the speculation of an actual tweak today," giving the Nikkei "a
shot in the arm," Rodda added. 
    The Nikkei ended the morning session down 0.15%, following a
Nikkei newspaper report that the central bank was considering
raising the yield ceiling. The BOJ announcement came at the end
of the midday trading recess.
    Tech stocks remained a drag on the Nikkei, with chip-related
shares tracking a decline in U.S. peers overnight and Panasonic
sliding on disappointing earnings.
    Chip-testing equipment manufacturer Advantest  6857.T  was
the Nikkei's biggest drag, shaving off 50 points with a 4.67%
slide. Renesas Electronics  6723.T  tumbled more than 6%.
    The U.S. Philadelphia SE semiconductor index  .SOX  lost
1.3% on Monday, even as all three of Wall Street's main indexes
gained.
    Panasonic  6752.T  was the biggest percentage decliner on
the Nikkei by far, slumping 8.91% after cutting the profit
outlook at its EV battery unit.
    Of the Nikkei's 225 components, 178 rose versus 45 that
fell, with two flat.

 (Reporting by Kevin Buckland; Editing by Subhranshu Sahu,
Mrigank Dhaniwala and Sonia Cheema)
 ((Kevin.Buckland@thomsonreuters.com;))