Econintersect: The initial reaction of stocks was negative after the latest Bank of Japan announcement Tuesday to increase slightly planned purchases of bonds in the ongoing quantitative easing effort to stimulate that country's economy. What a difference a day makes! Wednesday (31 October 2012) stocks have charged ahead. The Tokyo Exchange saw the Nikkei 225 Index up 1% at the close, following a 148 point (1.6%) collapse in the last two hours of trading on Tuesday. The market seemed to feel that the BoJ had taken a disappointingly timid action.
At one point in the early afternoon the Nikkei came within 4 points of recovering the entire loss before settling back. The reason for the positive market move was summarized by the Financial Times:
...risk appetite has been encouraged by the unusual joint statement from the central bank and the government stressing their commitment to reducing deflation.
Reuters referred to the sharp sell-off Tuesday afternoon as "profit taking", which opinion seems quite a reasonable assessment in light of Wednesday's rebound.
Elsewhere in the Asia/Pacific region, narkets were mixed. Of the eleven markets listed on Yahoo Finance, four were down, but only Jakarta (-0.6%) losy more than 0.3%. Among the rising markets, the strongets (after Tokyo) were Sydney, Hong Kong and Seoul, all advancing by 0.6% to 0.7%.
- Asian stocks rise in wake of BoJ Easing (Song Jung-a and Jamie Chisholm, Financial Times, 31 October 2012)
- Asian shares rise on growing risk appetite (Chikako Mogi, Reuters, 31 October 2012)