TOKYO —Japan’s Nikkei share average rose to an eight-week high yesterday, spurred by expectations the US Federal Reserve will deliver only a modest cut to its massive stimulus programme at the conclusion of its two-day meeting.
Reuters
The Nikkei rose 1,9% to 14 577,93 in mid-morning trade after rising to 14 578,34 at one point, the highest level since July 25. In the short-term, resistance for the Nikkei is seen at 13 606,66, a 68% retracement of its May high to its low in June.
“The market has started pricing in the possibility that the Fed will start scaling back its stimulus, but the impact is likely to be limited,” said Hikaru Sato, a senior technical analyst at Daiwa Securities.
The policy-setting Federal Open Market Committee began meeting on Tuesday to discuss whether to trim its $85 billion in monthly purchases, or quantitative easing.
Many investors expect Fed chairman Ben Bernanke will announce later yesterday a modest scaling back of purchases by $10 billion a month, and signal that any actual policy tightening is still distant.
Global markets have been buffeted in the past few months by the heightened speculation of a cut in the Fed’s stimulus, which has underpinned riskier assets in recent years.
Bellwether exporters rebounded, with Toyota Motor Corp rising 1,3% and Honda Motor Co up 1,3%.
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The Topix added 1,1% to 1 194,47, with all subsectors in positive territory.
But analysts said that if the Fed scales back the stimulus only modestly, the dollar will be on the defensive, which may limit gains in the exporter-sensitive Japanese market. A weak yen lifts exporters’ competitiveness abroad as well as their profits when repatriated.
The greenback traded at ¥99,15, not far off Monday’s two-week low of 98,45.
“If the timing and the size of tapering is announced as expected, the Japanese market may not rise that much compared to emerging countries where the impact from the Fed’s tapering is bigger,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management.
Currencies and stocks in emerging countries were battered in recent months on worries that the Fed’s tapering could prompt an exodus of capital out of the region.
Yesterday Kawasaki Heavy Industries Ltd soared 4,7% after TV Tokyo reported that the company received orders worth ¥180 billion to make train cars for Long Island Railroad in New York.
The benchmark Nikkei is up around 40% this year, underpinned by the Japanese government’s aggressive monetary and fiscal stimulus, but is still down about 10% since its May peak.
