The yen fell to a six-year low against the dollar after the Bank of Japan unexpectedly increased unprecedented monetary stimulus.
Japanese government bonds rallied after the BOJ said it will seek to expand the monetary base by 80 trillion yen ($726 billion) a year, up from a previous 70 trillion yen, at a meeting today. Japan’s currency had earlier dropped versus major peers after the Nikkei newspaper said the $1.2 trillion Government Pension Investment Fund will increase foreign investments to 40 percent of assets from 23 percent. However few economists surveyed predicted an asset purchase expansion.
The yen fell 1 percent to 110.24 per dollar at 1:55 p.m. in Tokyo and touched 110.30, the weakest level since August 2008. Japan’s currency was down 0.7 percent at 138.74 per euro. The euro dropped 0.2 percent to $1.2587.
The benchmark 10-year Japanese yield slid three basis points to 0.44 percent.
Japanese stocks soared with the Bank of Japan’s unexpected increased in its target for monetary expansion.
Japan’s public pension fund will announce new asset allocations today, a government official said after the Nikkei report. GPIF will boost its targets for both local and overseas stocks to 25 percent, and foreign bonds to 15 percent, the Nikkei said. It plans to reduce domestic debt to 35 percent, the newspaper reported, without saying where it got the information.
The Nikkei 225 jumped 3.7 percent to 16,243.76 as of 1:59 p.m. in Tokyo after climbing as much as 4.5 percent. The Topix index advanced 3.2 percent, erasing its 2014 loss. The yen slumped 0.9 percent to 110.25 per dollar.
Shares extended gains after BOJ policy makers voted 5-4 today to target an 80 trillion yen ($726 billion) annual expansion in the central bank’s monetary base.