Asian stocks pare declines on Bank of Japan stimulus

London: Asian stocks pared declines, with Japanese shares reversing losses, after the Bank of Japan expanded its stimulus programme in its first policy decision under new governor Haruhiko Kuroda.

The MSCI Asia Pacific Index slid 0.6 per cent to 134.11 as of 6:05 pm in Tokyo, paring a loss of as much as 1.1 per cent. Japan’s Topix Index reversed declines of as much as 2 per cent to close 2.7 per cent higher after the central bank said it will double monthly bond purchases in a bid to reach 2 per cent inflation in two years. Markets in China, Hong Kong and Taiwan are closed for a holiday.

European stocks were little changed, following Wednesday’s biggest drop in five weeks, as investors awaited an update on monetary policy from European Central Bank President Mario Draghi. US index futures advanced, while Asian shares retreated.

Banca Generali SpA lost 5.8 per cent after Assicurazioni Generali SpA put part of its stake in the lender on sale. European Aeronautic, Defence & Space Co dropped 1.4 per cent as a shareholder offered to sell a 384 million-euro ($492 million) stake. BTG Plc gained 4.3 per cent after increasing its sales forecast for 2013.

The Stoxx Europe 600 Index slipped 0.1 per cent to 294.39 at 9:12 am in London, paring a drop of as much as 0.3 per cent. The equity benchmark slid 0.9 per cent yesterday and the Standard & Poor’s 500 Index retreated from a record high in New York as US services and jobs data missed forecasts. S&P 500 futures rose 0.2 per cent today, while the MSCI Asia Pacific Index slipped 0.6 per cent.

The yen sank across the board on Thursday after the Bank of Japan unveiled a set of bold easing measures, while weak euro zone business data piled pressure on the single currency before a European Central Bank meeting.

The BoJ announced a radical overhaul of its policy framework, shifting to a new target for setting monetary policy, and pledging to double its government bond holdings in two years as it seeks to end nearly two decades of deflation.

“The market expected some of these initiatives but not the kind of scale they (the BoJ) have delivered,” said Daragh Maher, currency strategist at HSBC.

The yen slumped by 2.5 per cent to around 95.40 yen to the dollar — its biggest daily move since October 2011 — and by 2.1 per cent to about 122 yen against the euro. The falls helped lift the dollar 0.8 per cent against a basket of major currencies to an eight-month high of 83.39.

The BoJ’s moves also sent Japan’s Nikkei stock average up 2.2 per cent, while the 10-year Japanese government bond yield dropped to 0.425 per cent, breaking its previous record low of 0.43 per cent hit in June 2003.

European shares held steady but the euro slid against the dollar after fresh business data confirmed the currency bloc’s economic decline had dragged on into March.

The survey of the euro zone services sector, which covers thousands of companies from banks to hotels and restaurants, showed order books had shrunk at their fastest pace in half a year last month.

“The recession is deepening once again as businesses report that they have become increasingly worried about the region’s debt crisis and political instability,” said Chris Williamson, chief economist for the survey’s compiler Markit.

The picture of ongoing weakness across the euro area has revived talk that the ECB may consider either easing its policy or introducing other measures to help struggling business.

“We’ve had softer numbers in Europe. Does that mean we get a rate cut? I suspect not, but you’re going to be positioned for that kind of probability,” said HSBC’s Maher.

The single currency fell 0.4 per cent to $1.28 after the data, staying near a four-month low of $1.2750 set last week when it was hit by concerns about Cyprus and factory data pointing to a weak outlook for euro zone economies.

The FTSEurofirst 300 index of top European shares, which had dropped as much as 0.3 per cent in early trade, was back to flat by mid-morning, while London’s FTSE 100, Paris’s CAC-40 and Frankfurt’s DAX were between 0.1 per cent lower and 0.5 per cent up.

The ECB is expected to hold interest rates steady at a record low of 0.75 per cent, but markets will be watching President Mario Draghi’s subsequent news conference for any hints the bank is preparing for a future cut or considering other measures to help the recession-hit region.

Before that, the Bank of England will reveal its latest policy decision and is expected to hold its key rate at 0.5 per cent where it has been for over four years.