By Yuki Yamaguchi,
The yen briefly plunged by 3 yen to the mid-131 range against the U.S. dollar Wednesday in Tokyo after the Bank of Japan defied market pressure and maintained its ultraeasy monetary policy, with stocks soaring and the key government bond yield tumbling.
The yield on the benchmark 10-year government bond dropped to 0.360 percent at one point, its lowest since late December, returning to within the upper limit of 0.500 percent set by the BOJ last month.
The yield had risen above the bank's ceiling for the fourth straight day earlier Wednesday before ending at 0.415 percent, down 0.085 percentage point from Tuesday's close.
The 225-issue Nikkei Stock Average ended up 652.44 points, or 2.50 percent, from Tuesday at 26,791.12, its highest close since Dec. 19. The broader Topix index finished 32.04 points, or 1.68 percent, higher at 1,934.93.
The Japanese currency plummeted to 131.57 against the dollar from the mid-128 range after the central bank's decision to leave its ultralow rate policy unchanged triggered sell-offs by speculators who had bought the yen expecting a further policy tweak, dealers said.
The BOJ surprised markets in the previous meeting in December by allowing the key long-term government bond yield to move in a wider range, a change seen as effectively a rate hike.
At 5 p.m., the U.S. dollar fetched 130.24-27 yen compared with 128.07-17 yen in New York and 128.71-73 yen in Tokyo at 5 p.m. Tuesday.
The euro was quoted at $1.0827-0828 and 141.03-07 yen against $1.0785-0795 and 138.23-33 yen in New York, and $1.0828-0830 and 139.37-41 yen in Tokyo late Tuesday afternoon.
The Nikkei index ended at a one-month high after stocks rose almost across the board, as the weaker yen and a slide in long-term interest rates lifted sentiment.
"Speculators reversed their stances on stocks, the yen and bonds as there was no change in the BOJ policy," said Chihiro Ota, assistant general manager of investment research and investor services at SMBC Nikko Securities Inc.
Exporters drew buying on expectations of better earnings due to the yen's depreciation. Mitsubishi Motors gained 20 yen, or 4.2 percent, to 494 yen. Optical equipment maker Olympus advanced 111.0 yen, or 4.8 percent, to 2,441.5 yen.
Bank stocks were the only loser in the 33 major stock categories, falling on the view that the BOJ's ultraeasy monetary policy will continue to hurt their earnings. Mitsubishi UFJ Financial Group lost 7.5 yen, or 0.8 percent, to 943.1 yen.
The BOJ's decision came after investors had tested the central bank's resolve to maintain its latest yield cap since the policy change last month, unloading their bond holdings in anticipation of a further widening of the band or scrapping of its signature yield curve control policy altogether. Yields move inversely to prices.
"The BOJ may have thought it better to maintain the current stance to avoid further disruption in the market, but investors will likely continue pressuring the bank to change its policy as they believe it is untenable," said Yukio Ishizuki, senior foreign exchange strategist at Daiwa Securities Co.
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BOJ faces market scrutiny over 1st policy meeting after surprise tweak
Yen hits 7-month high in 129 zone vs dollar on BOJ speculation
