* 30-year yield falls below 20-year yield, curve inverted
* Nikkei climbs 3.5 pct to above 13,000 for 1st time in
nearly 5 years
* Yen hits 3-1/2-year low after BOJ's decision on Thursday
By Dominic Lau and Ayai Tomisawa
TOKYO, April 5 Japanese shares jumped to near
five-year highs and government bond prices rose sharply on
Friday, with the long-end of the yield curve inverting, a day
after the Bank of Japan announced extraordinary stimulus
measures to reignite the world's third-largest economy.
The massive stimulus steps promise to inject about $1.4
trillion into the economy in less than two years by buying
government bonds across the yield curve as well as riskier
Yields on benchmark 10-year Japanese government bonds
sank as much as 12 basis points to a record low
of 0.315 percent on Friday morning, while Tokyo's Nikkei stock
average jumped as much as 4.7 percent to above 13,000
points for the first time since August 2008.
"It's the biggest day in my career," said Stefan Worrall,
director of equity cash sales at Credit Suisse.
Worrall described it as a "reverse earthquake in terms of
the flow", comparing it with a massive sell-off right after the
earthquake and tsunami that hit Japan in March 2011.
"This is moved by the BOJ yesterday, and it was the action
from many interested investors who have yet to participate in
the rally, who were sitting on the sidelines wanting to see
action after all of the hype and talk from the BOJ and Abe."
The benchmark Nikkei has surged 51 percent since
mid-November when Prime Minister Shinzo Abe unveiled in his
election campaign expansionary fiscal and monetary policies to
pull Japan out of deflation.
The Nikkei was up 3.5 percent at 13,080.97 by late Friday
morning, with volume at 14 percent above its full daily average
for the past 90 trading days.
The yen hit a 3-1/2-year low of 97.06 to the dollar
after dropping 3.6 percent on Thursday, its biggest one-day fall
since October 2008.
Shares in real estate companies jumped 14.3
percent and financial firms also rose sharply as they were
expected to benefit most from the reflationary drive, which will
see the central bank double its monetary base to 270 trillion
yen ($2.80 trillion) by the end of 2014.
The BOJ's policy is unmatched in scope even by the U.S.
Federal Reserve's own quantitative easing programme. The Fed may
buy more debt, but the Japanese central bank's stimulus is much
larger as a proportion of the economy.
INVERTED YIELD CURVE
In the JGB market, 10-year futures reached a record
high of 146.41 and the 30-year yield fell below
that of 20-year debt, resulting in an unusual
yield curve inversion.
Naomi Muguruma, senior fixed-income strategist at Mitsubishi
UFJ Morgan Stanley Securities, said the curve inverted for the
first time "in a long time," but it may be a temporary
"The supply/demand balance between 20- and 30-year JGBs was
kind of distorted by the BOJ's announcement to purchase the
longer end of the curve," Muguruma said.
"It could continue for a while, but we cannot say for sure
unless the BOJ's actual purchases begin, and that might change
investors' behavior," she said.
"Those who used to purchase 30-years would probably avoid
buying at lower yields than the 20-year, so those investors
would switch to 20-years and the inversion would be corrected. I
think that's the rational reaction expected from investors."
The 30-year yield was last quoted at 1.010 percent, below
that of 20-year's 1.040 percent.
Yields on 10-year JGBs fell 2 basis points to 0.415 percent,
paring earlier declines, while 10-year futures shed 0.34 point
to 145.70 as investors pocketed some profits.
"Many investors who were not even interested in Japan before
have opened their eyes ... They realised that if they continue
to look at Japan the way they did before, they are going to
lose," said Tetsuro Ii, the chief executive of Commons Asset
In terms of stock valuations, Japanese equities carry a
12-month forward price-to-earnings ratio of 14.1, slightly more
expensive than the U.S. S&P 500's 13.7 but below its
10-year average of 16.3, according to Thomson Reuters