Bank of Japan says to keep easing policies while markets ‘extremely volatile’

BoJ headquarters, Tokyo --AFP

TOKYO — The Bank of Japan’s deputy governor said Wednesday that officials would stick to their ultra-loose monetary policies given market volatility, sparking a big drop in the yen, while stocks rose.

Equities saw wild swings through the morning, with the benchmark Nikkei index finishing the session more than two percent higher, having been as much in the red after the open.

The yen has appreciated sharply since Japan’s central bank last week hiked interest rates for only the second time in 17 years — indicating plans for more if the economy performs as officials expect.

But in a speech on Wednesday morning, BoJ deputy governor Shinichi Uchida took a more dovish stance.

“I believe that the Bank needs to maintain monetary easing with the current policy interest rate for the time being, with developments in financial and capital markets at home and abroad being extremely volatile,” he said.

Uchida said that in recent days, “the yen has appreciated significantly against the US dollar, since large positions that had been built up on a weaker yen are being unwound”.

“Moreover, partly due to the correction of the yen’s depreciation, stock prices in Japan have declined to a greater extent than other economies,” he added.

After his speech, one dollar bought 146.69 yen, compared with 144.68 in New York.

A man cycles past a display board (R) showing the closing numbers after record losses on the Tokyo Stock Exchange, along with the yen-US dollar rate (C), along a street in Tokyo on August 5, 2024. Tokyo stocks sank more than 12 percent on August 5, battered by a resurgent yen and weak US jobs data that fuelled fears of a recession in the world’s top economy. (Photo by Richard A. Brooks / AFP).

The Nikkei finished the morning 2.28 percent, or 789.15 points, higher at 35,464.61, while the broader Topix index added 3.30 percent, or 80.31 points, to 2,514.52.

Investors were jittery after the Nikkei surged more than 10 percent on Tuesday, a day after tanking more than 12 percent on concerns about a possible US recession and the stronger yen.

“The market will likely remain nervous about the direction of the dollar-yen,” brokerage house Monex said.

Major shares reversed earlier losses to mark gains. Toyota rose 1.07 percent to 2,545 yen, semiconductor test-maker Advantest rose 1.09 percent to 6,205 yen and Nintendo added 2.02 percent to 7,659.