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TOKYO, Feb 6 AFP

February 06 2013, 2:08PM

Tokyo's benchmark Nikkei 225 index soared more than 3.0 per cent by the break on Wednesday as the yen plunged on surprise news that the head of the Bank of Japan would quit early.

The Nikkei was up 3.11 per cent, or 343.91 points, at 11,390.83, while the broader Topix index of all first-section shares jumped 2.87 per cent, or 26.93 points, to 966.63.

Bank of Japan (BoJ) Governor Masaaki Shirakawa on Tuesday said he would step down about three weeks before his five-year term is due to end on April 8, after the BoJ and Japan's new government butted heads on policy matters.

The country's new Prime Minister Shinzo Abe has openly said he wants a more like-minded candidate, fuelling expectations a new governor will take over who has similar views on following more aggressive monetary easing.

The BoJ head said he had told the prime minister he will resign on March 19, when the terms for two deputy governors expire, so that his successor and the rest of the bank's new leadership could be sworn in at the same time.

He rejected speculation that government pressure forced his early resignation.

"(His) explanation is entirely plausible, although Shirakawa could perhaps be forgiven for wanting to leave as soon as possible given the criticism he has received for 'not doing enough' to end deflation," London-based Capital Economics said in a note.

Last month, the bank said it would adopt a two per cent inflation goal demanded by the new government in a bid to beat the deflation that has haunted the world's third-largest economy for years.

It also unveiled an unlimited asset-purchase scheme to start next year.

But days later, Shirakawa cast doubt on the inflation target and said pressure on central banks has "risen globally more than ever".

The head of Germany's Bundesbank Jens Weidmann warned last month over what he described as government meddling in monetary policy, calling them "disturbing abuses".

In Tokyo forex trading, the dollar bought 93.84 yen from 93.61 yen in New York on Tuesday, while the euro fetched 127.53 yen against 127.13 yen, continuing a slide that has seen the yen drop sharply in recent months.

Yen "weakness has resumed with a vengeance", National Australia Bank said in a note.

Apart from the weakening yen, risk appetite has risen, said SMBC Nikko Securities general manager of equities Hiroichi Nishi, just a day after global markets slumped on concerns over political uncertainty in Spain and Italy.

"Global markets continue to normalise, allowing risk-on trading to resume," he told Dow Jones Newswires.

"This is partially reflected in the fall of the yen."

Wall Street also provided a strong lead, recovering many of Monday's losses and picking up momentum from solid economic indicators. The Dow Jones Industrial Average finished 0.71 per cent higher at 13,979.30, near its record high.

In Tokyo stock trading on Wednesday, Toyota shares soared 4.95 per cent to 4,765 yen after the automaker late on Tuesday said net profit in the nine months to December quadrupled while it also lifted its full-year earnings outlook.

The weaker yen helped other exporters with Sony up 2.34 per cent to 1,481 yen, Nikon rising 0.34 per cent to 2,600 yen, Canon jumping 2.40 per cent to 3,400 yen and Panasonic up 4.03 per cent at 748 yen.