Japan's central bank vows to ensure stability, jointly combat excess market volatility
TOKYO - Bank of Japan (BOJ) Governor Haruhiko Kuroda on Monday vowed to make the utmost effort to ensure stability in financial markets by making sure ample funds are available to combat excessive volatility seen in global markets that have been rocked as the coronavirus continues to spread worldwide.
In a statement released earlier Monday, the BOJ chief said the central bank will "closely monitor future developments, and will strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases."
Economists here said that in twine with the belief that other major central banks, including the U.S. Federal Reserve, stood poised to jointly combat excessive volatility in the stock and other markets recently, the BOJ's statement helped sooth investor sentiment and helped end the benchmark Nikkei stock index's five-day losing streak Monday.
In a similar move last week, the Fed indicated it could further cut its interest rates to help underpin the world's largest economy, with the BOJ also keen to convince investors that the recent rout that saw Tokyo stocks plunge to levels not seen since the global financial crisis in 2008, did not mean markets were in a free-fall.
"Global financial and capital markets have been unstable recently with growing uncertainties about the outlook for economic activity due to the spread of the novel coronavirus," Kuroda said in the statement.
"The Bank of Japan will closely monitor future developments, and will strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases," the bank said in a rare statement referencing market turmoil.
The central bank, henceforth, is widely expected to increase its purchases of government bonds and exchange traded funds (ETFs), economists here said.
Following the BOJ's statement, Tokyo stocks pared earlier losses and moved into positive territory, supported by solid performances on Shanghai and Hong Kong bourses, market analysts here said.
An initially firm safe-haven yen against the U.S. dollar, which sent exporter issues lower and dragged down the broader market, was softened as the U.S. dollar started to rally after Kuroda's statement, investment strategists here highlighted.
The dollar was quoted at 108.44-45 yen at 5:00 p.m. local time in Tokyo, compared with 108.00-10 yen in New York and 108.83-85 yen at 5:00 p.m. on Friday in Tokyo.
The euro, meanwhile, fetched 1.1063-1064 dollars and 119.97-120.01 yen against 1.1022-1032 dollars and 119.20-30 yen in New York and 1.0996-0997 dollars and 119.67-71 yen in late Friday afternoon trade in Tokyo.
"Kuroda's statement soothed investors who had been gripped by the coronavirus fears," Makoto Sengoku, a market analyst at the Tokai Tokyo Research Institute, was quoted as saying, with the market bouncing back from a five-day losing streak, during which it relinquished 10 percent over the past five sessions.
By the close of play Monday, the 225-issue Nikkei Stock Average gained 201.12 points, or 0.95 percent, from Friday to 21,344.08.
The broader Topix index of all First Section issues on the Tokyo Stock Exchange, meanwhile, added 15.00 points, or 0.99 percent, to finish at 1,525.87.
Service, farm and fishery, and retail issues comprised those that found particular favor during trading hours on Monday, market players noted.