BOJ "No More Interest Rate Hikes"... Japanese Stock Market Closes Up 1.2%

Yen Weakness Is a Boon for the Japanese Stock Market

The Nikkei 225, Japan's representative stock market index, rose slightly on the 7th, reclaiming the 35,000 level.

On that day, the Nikkei index closed at 35,089, up 1.2% from the previous day. After a rollercoaster performance on the 5th and the previous day, the Nikkei index at one point in the morning showed a decline of over 2.6%.

However, the index turned upward after Shinichi Uchida, Deputy Governor of the Bank of Japan (BOJ), stated in a lecture held in Hokkaido that "there will be no interest rate hikes amid unstable financial capital markets." Deputy Governor Uchida proactively dismissed market concerns about the yen's strength.

An increase in Japan's benchmark interest rate tends to cause the yen to appreciate against the dollar, which in turn puts downward pressure on the stock market. One of the main drivers behind the recent rise in the Japanese stock market has been the improved earnings of Japanese export companies due to a weaker yen.

The yen-dollar exchange rate, which was in the mid-144 yen range in the morning, rose to the 146.8 yen level around 3:25 p.m. An increase in the dollar-yen exchange rate means a depreciation of the yen's value.

Previously, the Nikkei 225 closed at 31,458 on the 5th, down 12.4% from the previous trading day. The one-day drop was the largest ever, surpassing the level seen on October 20, 1987. On the following day, the 6th, a rebound buying wave due to recognition of excessive decline pushed the index up 10.2%, closing at 34,675. This was the largest one-day gain in history.