Japan's Nikkei hits 4-month high on Wall Street's lead; BOJ lifts banks
TOKYO: Japan's Nikkei share average advanced to a four-month high on Tuesday, tracking overnight Wall Street gains following signs of a potential de-escalation of tensions in the Middle East.
Bank shares rose after the Bank of Japan signalled it is still on track to raise interest rates in the longer term. The broader equity market, however, largely shrugged off widely expected decisions to keep borrowing costs steady and slow the pace of government bond purchase reductions from next April.
The Nikkei closed 0.6 per cent higher at 38,536.74. Earlier in the day, it reached 38,581.25 for the first time since February 21. The broader Topix added 0.4 per cent.
All three major US stock indexes advanced strongly on Monday as market sentiment improved with Iran seeking a ceasefire with Israel.
The latest flare-up in the Middle East more closely resembles the Six-Day War of 1967 than other longer-lasting conflicts in the region, said Tony Sycamore, an analyst at IG.
"The market's relief over this has been augmented by a cooling in crude oil prices after Israel left key Iranian oil export infrastructure untouched."
Meanwhile, the BOJ maintained short-term rates at 0.5 per cent by a unanimous vote at the two-day policy meeting that ended on Tuesday. It also decided to halve the pace of debt purchase reductions from next April to help support the bond market.
At the same time, policymakers see consumer prices as still on track to meet the central bank's target, with BOJ Governor Kazuo Ueda likely to reiterate a commitment to raising rates at his press conference.
"Despite referencing domestic political developments, tariff negotiations and Middle East geopolitical tensions, the BOJ highlighted a steady rise in inflation, maintaining a possible pathway for another rate hike this year, potentially in October," said Shoki Omori, chief desk strategist at Mizuho Securities.
The Topix banking index ended the day up 0.3 per cent, reversing morning session losses.
Japanese growth shares still outperformed, though, with a Topix index of the securities up 0.5 per cent, compared with a 0.2 per cent rise for value shares.
Chip-related stocks were among the Nikkei's top performers. Disco was the biggest percentage gainer with a 6.3 per cent surge. Advantest climbed 2.4 per cent and Tokyo Electron advanced 2.9 per cent.
Out of the Nikkei's 225 components, 136 rose, 83 fell, and six ended flat.
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