Japan shares hit 5-year high on BOJ stimulus plan

Japanese shares jumped to near five-year highs and government bond prices rose sharply on Friday, a day after the Bank of Japan announced extraordinary stimulus steps to revive the world’s third-largest economy.

The massive stimulus measures promise to inject about US$1.4 trillion (HK$10.9 trillion) into the economy in less than two years by buying government bonds across the yield curve as well as riskier exchange-traded funds and

Yields on benchmark 10-year Japanese government bonds sank as much as 12 basis points to a record low of 0.315 per cent on Friday morning, while Tokyo’s Nikkei stock average jumped as much as 4.7 per cent to above 13,000 points for the first time since August 2008.

Investors cashed in some of the sharp gains in the afternoon, ahead of the key US nonfarm payroll report later in the day.

“Similar price action happened in the US after early QEs. The market rallied for a day or so but then investors rushed to lock in the windfall on their bond holdings,” said Neale Vincent, chief quantitative strategist for fixed-income at Nomura Securities in Tokyo.

The BOJ will double its monetary base to 270 trillion yen (HK$22.1 trillion) by the end of next year. The policy is unmatched in scope even by the US Federal Reserve’s own quantitative easing programme. The Fed may buy more debt, but the Japanese central bank’s stimulus is much larger as a proportion of the economy.