16-6-2023 (TOKYO) Japan’s Nikkei index reached a fresh three-decade high and recorded its 10th consecutive weekly gain on Friday. Investors responded positively to the Bank of Japan’s (BOJ) decision to keep its ultra-easy policy settings unchanged.
The BOJ reaffirmed its commitment to maintaining massive stimulus measures, pledging to “patiently” continue with its current policies. The Nikkei closed 0.7% higher at 33,706, reaching its highest level in 33 years during late trading.
With a 4.5% weekly gain, the index’s winning streak extended to 10 weeks, propelling it 22% higher, marking the longest winning streak in 11 years.
The broader Topix index also saw a 0.3% increase on Friday, ending the week with a 3.4% gain. The yen experienced a slight weakening, while Japanese government bonds rallied following the BOJ’s announcement.
Naka Matsuzawa, a strategist at Nomura, noted that the decision was not unexpected, but market reaction could be influenced by Governor Kazuo Ueda’s remarks during the press conference that followed at 3:30 p.m. JST (0630 GMT).
“Matsuzawa said, “Ueda’s style is to signpost leading in to meetings,” he said. “We’re not going to get the surprise policy changes we saw under (his predecessor Haruhiko) Kuroda.”
However, financials were the weakest sector of the day due to persistently low interest rates, which have kept lending margins for banks thin.
The recent rally in the market has been primarily driven by the weakened yen, which benefits exporters’ profits, and the inflow of funds from foreign investors. These investors have been impressed by the Japanese government’s efforts to enhance corporate governance and strengthen balance sheets.
Canon Inc shares surged 4.9%, closing at their highest level in five years, following the announcement of a stock buyback by the cameras-to-scanners conglomerate. Rivals Olympus and Nikon also experienced gains of 4.5% and 3.8% respectively.
Travel and consumer stocks also performed well during the trading session.
Japan Airlines saw its shares rise over 4% to a three-year high, while cosmetics-maker Shiseido recorded a 5.2% increase. On the other hand, lens-maker Hoya Corp experienced a decline of 2.4%, and railways operator Tokyu, which recently concluded a buyback, fell 2.5%.
Christopher Wood, the global head of equities strategy at Jefferies, emphasized the positive outlook for Japan, citing growing evidence of corporate governance improvements and indications of a revival in inflation.
