Japan's Nikkei rebounds as bank shares rally after BOJ decision

Panasonic Holdings

31/10/2023 05:06

By Kevin Buckland
       TOKYO, Oct 31 (Reuters) - Japan's Nikkei share average
rebounded after the Bank of Japan (BOJ) added more flexibility
to its yield curve control, but kept the policy in place.
    The stock benchmark  .N225  was up 0.42% at 30,825.95 as of
0441 GMT, after entering the midday recess down 0.15%. The BOJ
announcement came just before markets reopened for afternoon
trading.
    The broader Topix index  .TOPX  added 0.64%, extending small
gains from the morning. 
    Financial stocks were the biggest winners, with the Tokyo
Stock Exchange's (TSE) insurance  .IINSU.T  and banking
 .IBNKS.T  indexes rallying more than 2% each to lead gains
among the 33 industry sectors. Higher long-term yields and a
steeper yield curve improve the outlook for returns from lending
and investing.
    The banking index had been the best performer in the morning
session as well, following an overnight report in the Nikkei
newspaper that the central bank was considering raising the
ceiling for long-term Japanese government bond yields from 1%. 
    However, the index pared those gains aggressively in a
short-lived knee-jerk reaction after the BOJ confused traders by
keeping the 1% level as a reference point, while adding it would
not be viewed as 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," Rodda added. "The
decision has given the Nikkei a shot in the arm."
    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 - although
losses were overall lighter than in the morning.
    Chip-testing equipment manufacturer Advantest  6857.T 
remained the Nikkei's biggest drag, shaving off 37 points with a
3.5% slide. Chip-making equipment giant Tokyo Electron  8035.T 
was next, removing 10-1/2 points with a 0.53% drop.
    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, tumbling 8.7% after cutting the profit
outlook at its EV battery unit.
    Of the Nikkei's 225 components, 155 rose versus 68 that
fell, with two flat.

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