Asia stocks extend post-BOJ rally as yen, Japan bond yields sink

Asian stocks continued their climb, while Japanese bond yields tumbled as the impact of the central bank’s surprise stimulus move continued to be felt across financial markets. Currencies of nations with heavy exposure to China fell ahead of an update on manufacturing. Japan’s Topix index headed for an almost one-month high, helping equities across the region rise a fourth straight day after the Bank of Japan’s unexpected policy easing Friday saw global equities claw back some gains amid their worst month since August. Yields on Japan’s 10- and 20-year bonds slid to records, while the yen was on track for its longest slump versus the euro since 2013. Weaker-than-expected trade data hit the Korean won as the Australian and New Zealand dollars fell. U.S. crude oil held above $33 a barrel. Policy makers took the sting out of the weakest start to a year since 2009 for global equities, helping in the second half of the month to ease a selloff that wiped more than $5 trillion from market value. The European Central Bank’s indication that it could expand stimulus as soon as March was followed by the Federal Reserve standing pat on interest rates amid concern over the market turmoil. The BOJ outdid them both, shocking investors Friday by following the ECB in imposing negative rates, a strategy once considered unthinkable among central bankers that’s aimed at stoking spending. “With lower global growth and inflation expected, the BOJ has taken a leap forward, and Europe is considering a move as well,” Shoji Hirakawa, chief equity strategist at Okasan Securities Co. in Tokyo, said by phone. “Investors such as pension funds should slowly shift their assets from bonds to equities.” Crude oil’s revival in the last two weeks of January has also supported the return of risk appetite, with West Texas Intermediate crude capping a second week of gains on Friday amid speculation OPEC and Russia will meet to discuss output cuts and other moves to boost prices. The focus Monday will shift to global factory output, with manufacturing purchasing managers’ indexes for India to the euro area due, from both official and private sources. Economists are predicting a small drop in PMIs for China, which was the epicenter of the market turmoil in the first two weeks of January as regulators struggled to come to grips with a renewed equity rout. Chinese shares rallied with equities around the region on Friday, paring their worst monthly decline since 2008 to a still hefty 23%. As well as the swathe of manufacturing PMIs, Thailand and Indonesia update on consumer prices Monday. Malaysian markets are closed for a holiday. Market’s took the BOJ move “as a shot in the arm that central banks are not finished yet,” Con Williams, a rural economist in Wellington at ANZ Bank New Zealand Ltd., said in a note to clients Monday. “The two main reasons why the BOJ has done this are: first, to force financial institutions to either lend out or invest in risky assets any money that they receive from selling Japanese government bonds to the BOJ under the QQE, and second, to extend the life of its current easing policy given its inflation goal is proving elusive.” (By Emma O'Brien and Nao Sano/Bloomberg)