PrintJapan's Nikkei tops 70,000 for first time, bonds drop after BOJ hikes as expected
BY Reuters | ECONOMIC | 02:31 AM EDT* Central bank flags inflation risks without signalling urgency to tighten
* Yen steady near 160-per-dollar level seen as danger zone for intervention
* AI-related shares buoy Nikkei even as majority of components decline (Updates prices ahead of market close)
By Kevin Buckland
TOKYO, June 16 (Reuters) - Japan's Nikkei share average rose to a record high on Tuesday after the Bank of Japan raised interest rates as widely expected, without signalling urgency for further tightening in monetary policy.
Japanese government bonds slid after the decision, while the yen maintained a slightly stronger tone against the dollar.
Traders' attention will now be on the news conference by BOJ Deputy Governor Shinichi Uchida from 0630 GMT, when markets close, for any hints on the outlook for policy.
The Nikkei was up 0.2% at 69,474.95 as of 0555 GMT, and earlier jumped as much as 1% to reach 70,020.68 for the first time.
The broader Topix, however, was 0.4% lower at 3,984.30, after initially flipping to gains following the policy announcement, but then retracing that advance.
The BOJ's decision came during the trading break for stocks and bonds and had little initial effect on the yen, which remained slightly firmer at 160.295 per dollar. At the same time, it remained on the weaker side of the 160-per-dollar level considered a line in the sand for intervention by Japanese officials.
"The BOJ delivered what markets expected," said Charu Chanana, chief investment strategist at Saxo. "But the reaction shows this was not hawkish enough to force a major yen repricing."
The central bank "is still moving in a very gradual way and continues to say financial conditions will remain accommodative," she added. "This is mildly supportive for Japanese equities because the BOJ is tightening, but not in a way that threatens liquidity or earnings."
Of the Nikkei's 225 components, 67 rose versus 157 that fell, with one trading flat.
Several heavily weighted AI stocks had an outsized impact in
buoying the market. Chip-testing machinery makers outperformed,
with Advantest
Benchmark 10-year JGB futures lost 0.50 yen to 127.76 yen. The yield on the 10-year cash bond was 7 basis points (bps) higher at 2.655%. Yields rise when bond prices fall.
Moves elsewhere on the curve were more muted, with the two-year yield adding 1 bp to 1.405% and 30-year yields rising 3.5 bps to 3.78%.
Prior to Tuesday, yields had been declining over the past several weeks from record highs, with inflation fears receding amid optimism for a near-term end to the Iran war.
The BOJ said in its statement that growth risks from the Middle East conflict have diminished, but the price outlook warrants attention. (Reporting by Kevin Buckland; Editing by Subhranshu Sahu; Ronojoy Mazumdar and Kim Coghill)
