Asian markets sink as BoJ move raises stimulus fears

HONG KONG – Asian markets tumbled in holiday-reduced trade on Wednesday, June 12, with Tokyo leading the losses as the yen surged against the dollar following the Bank of Japan’s refusal to unveil any fresh stimulus measures.

The greenback managed to claw back some ground in early Asian forex business but remains stuck more than 6% below its peaks seen at the end of last month.

Tokyo tumbled 1.94%, adding to the 1.45% loss on Tuesday as investors were sent running by the BoJ announcement.

Sydney was 0.78% lower while Seoul skidded 0.19% and Wellington dipped 0.32%.

Trade was limited with Hong Kong, Shanghai, Taipei and Manila all closed for public holidays.

The BoJ said Tuesday, June 11, the Japanese economy was “picking up”, but while it warned of possible headwinds caused by weakness in key export markets it chose not to add to April’s giant bond-buying splurge.

The decision reignited concerns about the role of central banks in supporting the economy, with the US Federal Reserve signalling it wanted to draw up a plan to wind down its own huge $85 billion-a-month stimulus scheme.

“Stock market rises globally have been fuelled for so long in one way or another by government monetary easing programmes that any talk of their termination seems to result in knee-jerk reactions,” said Daisuke Uno, strategist at Sumitomo Mitsui Banking Corp.

“What the BoJ announced was not really new, nor dramatic, and largely applied to the bond market, but stocks are inextricably tied to currency market movements.”

He added: “The case can be made that the dollar is in line for a retracement after running up from below 80 yen to well over 100 yen in the last several months.”

On forex markets Wednesday, the dollar bought 96.22 yen in Tokyo, compared with 96.01 late in New York, but well down from 98.11 yen in Tokyo earlier Tuesday. It had hit a high of almost 104 yen in May.

The euro traded at 128.25 yen, from 127.81 late Tuesday, while it was also at $1.3310, from $1.3311.

Wall Street also suffered, with the Dow falling 0.76%, the S&P 500 off 1.02% and the Nasdaq losing 1.06%.

Oil prices also eased, with New York’s main contract, light sweet crude for delivery in July, dropping 51 cents to $94.87 a barrel and Brent North Sea crude for July down 36 cents at $102.60.

Gold was at $1,376.60 at 0200 GMT from $1,369.29 late Tuesday. – Rappler.com