Nikkei rallies 2.2 pct on BOJ's bold easing; reflation stocks gain

Thu Apr 4, 2013 3:18am EDT

* BOJ announces bold monetary easing steps
    * Market welcomes purchases of Reits and ETFs - fund
    * REITs and other reflationary stocks outperform
    * Further weakening in yen necessary for Nikkei's sustained
gain - analyst

    By Ayai Tomisawa
    TOKYO, April 4 (Reuters) - Japan's Nikkei average jumped 2.2
percent to a two-week high in heavy trade on Thursday after the
Bank Of Japan announced a sweeping monetary expansion campaign
that will include heavy investment in REITs and ETFs, boosting
reflationary stocks such as real estate firms and banks.
    The Nikkei rose 272.34 points to 12,634.54, within 
striking distance of a 4 1/2 year high of 12,650.26 hit on March
21. The BOJ decision saw the benchmark quickly reverse early
losses of more than 2 percent which were prompted by concerns
over the U.S. economic recovery.
    Market players said that the central bank has responded to
market expectations, which triggered buying from foreign
investors who have been betting on further gains in the Japanese
market this year. 
    In an effort to end decades of grinding deflation and inject
life into the world's third-largest economy, the BOJ announced a
radical shift in policymaking, adopting a new balance sheet
target and pledging to double its government bond holdings in
two years. 
     At Governor Haruhiko Kuroda's debut policy-setting meeting,
the central bank shifted its policy target to the monetary base
from the overnight call rate, which is at zero to 0.1 percent.
    It also said that it will increase purchases of Japan
real-estate investment trusts (REITs) by 30 billion yen ($323
million) per year and increase purchase of exchange traded funds
(ETFs) by 1 trillion yen per year.
    The Topix jumped 2.7 percent to 1,037.76 in heavy
trade, with 4.27 billion shares changing hands, the highest
level in nearly three weeks. It compares with last month's daily
average volume of 3.24 billion shares. 
    "The market welcomed the BOJ's stance by responding to
market's expectations," said Yasuo Sakuma, portfolio manager at
Bayview Asset Management.
    He said the central bank's decision to bring forward the
timing of open-ended asset purchase was widely expected, but 
the BOJ's plans to increase the amount of purchases of REITs and
ETFs was a positive.
    "It gave an impression that it is a central bank which can
communicate with the market well."
     The REIT index, which was trading in negative
territory earlier, immediately responded to the announcement and
ended 4.3 percent higher. Japan Hotel Reit Investment Corp
 rose 4.3 percent, Mori Hills Reit Investment Corp
 jumped 6.0 percent and Nippon Building Fund Inc
 added 6.0 percent.
    Real estate and banking stocks, which are also beneficiaries
of the government's reflationary policy, fared well, with
Mitsubishi UFJ Financial Group gaining 5.5 percent and
Sumitomo Mitsui Financial Group adding 6.6 percent.
    The real estate subindex gained 7.4 percent and
was the best sectoral performer. Mitsui Fudosan Co 
jumped 7.8 percent, while Mitsubishi Estate Co surged 7.2
percent and Sumitomo Realty & Development Co soared 10
percent.
    "Foreign investors like these three big real estate firms,
and these stocks will likely continue climbing," said Norihiro
Fujito, a senior investment strategist at Mitsubishi UFJ Morgan
Stanley Securities.
    However, Fujito said that the Nikkei's further gains would
depend on how exporters fare, as their stock prices generally
determine the index's performance.
    "The weak yen trend is seen to have paused for a while. The
Nikkei will likely rise to 13,000 if the dollar rise towards 97
yen, but if not it will probably hover around 12,000," Fujito
said.
    A weak yen lifts exporters' overseas earnings when
repatriated and boosts their competitiveness in the global
market.
    On Thursday, the dollar rose to 94.62 yen after the BOJ's
easing, pulling away from a one-month low of 92.57 hit on
Tuesday, though it is still off a 3-1/2 year peak of 96.71 set a
few weeks ago.
    Exporters also advanced with Toyota Motor Corp up
2.8 percent, Honda Motor Co adding 3.4 percent and Sony
Corp 0.2 percent higher.
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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