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Japan markets boosted by central bank nominee reports

2013-02-25 11:09:18

Japanese shares have risen and the yen weakened on reports that Haruhiko Kuroda

is likely to be nominated as the next Bank of Japan (BOJ) governor.

Mr Kuroda, currently the President of the Asian Development Bank, is seen as a

supporter of monetary policy easing as means to spur growth.

The Nikkei 225 index rose 2.4%, while the yen fell to a 33-month low.

Analysts said Mr Kuroda's nomination is likely to see the BOJ support the

government's aggressive policy stance.

Japan's new Prime Minister Shinzo Abe has called upon the central bank to ease

its policies and boost stimulus measures to help revive a sluggish Japanese

economy.

"If the report is right, it means Abe has won," said Kyoya Okazawa, head of

global equities and commodity derivatives at BNP Paribas in Tokyo.

"There will no longer be any resistance or opposition to Abenomics," Mr Okazawa

added.

Further boost?

Among the various measures that have been proposed by Mr Abe, has been the call

for Japan's central bank to take measures to stoke inflation in the country.

Japan has been fighting deflation, or falling prices, for best part of the last

decade.

The issue has been a big hurdle in its attempts to boost domestic demand as

consumers tend to put off purchases in hope of getting a better and cheaper

deal later on.

Under pressure from the government, the Japanese central bank doubled its

inflation target to 2% last month.

During his election campaign Mr Abe had also hinted that the central bank

should print "unlimited yen" to help fight deflation.

The idea being that with more money sloshing about the system, everyone should

more have cash in their pockets and be happier to spend.

These aggressive stands have had a big impact on the Japanese markets.

The yen has weakened nearly 15% against the US dollar since November last year.

A weak yen is good news for Japanese exporters as it not only makes their goods

more affordable to foreign buyers but also boosts their profits when they

repatriate their foreign earnings back home.

The weakness in the yen, coupled with hopes that the aggressive policies will

help revive the economy, have also resulted in a surge in the stock market.

The Nikkei 225 index has surged 28% since November.

Analysts said Mr Kuroda's appointment may see a further weakening in the yen,

which may prompt the stocks to continue their surge.

"Kuroda is a fan of a weaker yen and of deflation-bashing," said Kit Juckes, a

strategist at Societe Generale.