Welcome to Japan, where a central bank plan to pump $26 billion a year more into stocks and continue buying 30 times that in debt sees equities struggle to advance and bonds plunge.
The Topix index slid as much as 1.4 percent in Tokyo after the Bank of Japan boosted its annual exchange-traded fund budget to 6 trillion yen ($58 billion), from 3.3 trillion yen. Japanese government bonds headed for their steepest slump since 2008, as policy makers retained a plan to expand the monetary base by an annual 80 trillion yen.
Speculation among investors and analysts that Friday’s policy announcement might even see the adoption of so-called helicopter money, as well as a cut to the negative deposit rate, resulted in a lukewarm reception for the expanded stimulus program. The yen surged as much as 2.4 percent, the most since the U.K. decision to leave the European Union, even as BOJ Governor Haruhiko Kuroda hinted more easing might still be in the pipeline.
“The BOJ had a choice of about five boxes to tick today, but only chose one,” said Sean Callow, a senior foreign-exchange strategist at Westpac Banking Corp. in Sydney. “Buying more ETFs was as widely expected as balloons dropping on Hillary.”
The Topix index of stocks reversed losses to be 0.6 percent higher at 1,315.06 as of 2:41 p.m. in Tokyo. The yield on the benchmark JGB jumped as much as 10 1/2 basis points to minus 0.17 percent. The yen traded 1.8 percent stronger at 103.37 per dollar, after rising to as high as 102.71.
In an unexpected development, Kuroda has ordered an assessment of the effectiveness of BOJ policy, to be undertaken at the next meeting, which is scheduled for Sept. 20-21. The central bank also doubled the size of a U.S. dollar lending program. The governor will speak to the press from 3:30 p.m. in Tokyo.