EBC Markets Briefing | Japan stocks jump 3% as yen slips

Asian stock markets opened higher on Thursday, tracking gains on Wall Street fuelled by a tech rally.

Japan’s Nikkei 225 jumped 3% in early trading, while the Chinese market remained struggling.

A pause in the yen’s strengthening gave a boost to exporters, though BOJ policy board member Naoki Tamura said the bank will need to raise its benchmark rate to at least 1% by the end of the projection period.

Expectations that the yen may strengthen further have prompted Wall Street to recommend unwinding currency hedges on Japanese shares that have outperformed many regional peers.

UBS raised its year-end yen forecast to 145 per dollar from 160. However, the bank has downgraded Japanese stocks to underweight in local-currency terms, citing risks the currency’s strength poses to earnings forecasts.

The central bank is set to leave rates unchanged at its next meeting this month, but more than half the economists polled by Reuters last month predict further tightening by the year's end.

BofA Securities says a bigger part of Japanese earning growth is now being determined by a company’s ability to hike prices in an inflationary environment, rather than by a weaker yen.

The benchmark index rallied from the low around 35,100 but the double top pattern signalled further loss ahead. The bearish bias will not likely be reverse until we see a break above 50 SMA.

EBC Institute Perspectives Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC International Business Expansion or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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