Nikkei 225 Leads Asian Market Gains Amid Wall Street Rally; Potential Yen Intervention After BOJ Meeting on Friday – BofA

In today’s trading session, the Nikkei 225 index surged by more than 2%, driven by a strong performance in technology shares fueled by optimistic expectations for earnings from US companies. 

Nikkei 225 closed at 38,460.08 gaining 907.92 points or 2.42% compared to yesterday’s figures. Meanwhile, the broader Topix index closed at 2,710.73 rising by 44.50 points or 1.67%.

Meanwhile, the Bank of America suggests that following the Bank of Japan’s monetary policy meeting on Friday, the Japanese Yen might surpass the 155 level against the US dollar.

In the analysis by BofA’s Shusuke Yamada, it’s noted that the BOJ has previously indicated that yen weakness could impact policy by affecting inflation. However, Yamada believes that reiterating this communication alone may not be sufficient to boost the yen. 

Yamada proposed that for the BOJ to strengthen the yen, it ought to recognize that its policy has been excessively accommodative, that the next interest rate hike is as close as June, and indicate that the terminal rate will be higher than what the market currently anticipates. 

However, Yamada stated that such a scenario is improbable, leading to the yen surpassing the 155 level and potentially prompting intervention. He added that failure to intervene around this level could prompt market buying, swiftly driving USD/JPY to 160 and testing Japan’s determination at that point. 

Elsewhere in Asia, the Hang Seng index gained 1.3% to 17,053.06, while the Shanghai Composite index went up by 0.2% to 3,026.88.

South Korea’s Kospi also gained 1.9% to 2,672.87, led by a 3% gain in Samsung electronics.  In Australia, the S&P/ASX 200 surged by 0.3% to 7,705.70 following the release of the fifth consecutive quarter of declaring inflation.