dailyfx financial markets headlines

The big news of the day was the end of the six-year reign of the zero interest rate policy in Japan as the BoJ pushed interest rates to 0.25%.  The board also voted to raise the official discount rate from 0.1% to 0.4%.  The market had largely expected the rate increase, but reacted sharply upon its release in all yen pairs.  The volatility of the markets can be attributed to the very dovish statement that followed the release, which said that "very low interest rates will probably be maintained for some time."  USD/JPY shot up as high 116.12 then tumbled down to 115.43 before climbing back up to 116.00 as of 6:45GMT.  GBP/JPY was even more volatile, while EUR/JPY posted a weekly high of 146.90.  Despite the rise in the rate some analysts are calling the news JPY-negative because of the dovishness of the board statement.

The Nikkei 225 stock average ended the morning session down 1.2% to 14,920.68, while the broader Topix also fell 1.2% to 1,532.25.  Banks showed mixed results ahead of the BoJ’s rate decision.  Mitsubishi UFJ fell 0.6% to Y1,610,000.  Sumitomo Mitsui fell 0.8% to Y126,000.  Mizuho declined 1.2% to Y971,000.  Resona Bank fell 2.4% to 366,000, and smaller Bank of Yokohama decreased 1.7% to Y926. The sector lost 1.1% as a whole.  The electronic machinery sector fell 1.7% on the prospect of a weaker US market.  Matsushita Electric Industrial, the maker of Panasonic consumer electronics, fell 1.4% to Y2,195.  Canon, the digital camera giant, lost 2% to Y5,510, while Competitor Konica Minolta fell 2.4% to Y1,362.  Sony, the consumer electronics and entertainment giant, fell 3% to Y4,780, after a European court on Thursday annulled the European Commission’s approval of Sony’s alliance with BMG in 2004, throwing the global music industry into turmoil.  Japanese carmakers also declined.  Honda fell 1.4% to Y3,510, while Toyota, the largest carmaker in Japan, dropped 1.2% to Y5,750.  Benefiting from the jump in oil prices were upstream and downstream petroleum companies.  Inpex, Japan’s largest explorer, climbed 1.9% to Y1,080,000.  Competitor Japex rose 0.8% to Y7,810.  AOC, the oil project developer, rose 2.6% to Y2,175.  Cosmo, the downstream oil company, increased 2% to Y531.  Nippon Oil, the largest distributor, gained 0.8% to Y892.

10 year Japanese government bonds tumbled seven basis points to 1.830% as prices hit 101.427.  JGBs gained prior to the rate annoucement and were boosted by the dovish statement accompanying the release.

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