JAPAN TODAY
 

TOKYO — The first policy meetings of the year for the U.S. Federal Reserve and the Bank of Japan will be key trading cues for Tokyo investors next week, after the Nikkei surged Friday. The benchmark index soared nearly 6% on speculation of extra stimulus, finishing a volatile week by climbing out of bear territory—marked by a decline of more than 20 percent from highs in June.

However, the market is likely to remain jittery next week, analysts said, as slumping oil prices and the gloomy outlook for China—a key driver of global growth—weigh on investor sentiment.

“The Fed and BOJ meetings will probably be positive ingredients for sentiment,” Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank, told AFP. “But the volatile situation in the market is likely to continue for the time being.”

The Fed is scheduled to hold its first meeting since lifting key, near-zero interest rates last month. The U.S. central bank will release a statement on Wednesday that investors will comb over for clues as to the pace of future rate hikes.

The BOJ is slated to gather on Thursday and Friday, amid speculation on Friday it was considering taking additional steps to offset the negative impact of slumping oil prices. Japan is also slated next week to release a string of economic figures—including inflation, industrial production and unemployment data on Friday—and as Japan Inc kicks off the quarterly earnings season.

On Friday, Tokyo’s blue-chip Nikkei 225 index soared as investors were cheered by gains on Wall Street and in Europe on hints of additional stimulus by the European Central Bank. The Nikkei jumped 5.88%, or 941.27 points, to 16,958.53. On the week, it lost 1.10%.

The broader Topix index of all first-section shares surged 5.59%, or 72.70 points, to 1,374.19. But the index was down 2.02% this week. Lifting the positive mood was a report in the Nikkei business daily on Friday, saying that the BOJ is considering whether to add stimulus to counter the risks of slumping oil prices and a stronger yen.

However, the policy board is unlikely to take drastic steps, Sera of Sumitomo Mitsui Trust Bank said, after tweaking its stimulus last month. It’s hard to believe the BOJ will introduce new stimulus so soon after last’s month’s meeting, Sera said.

“(Bank of Japan chief Haruhiko) Kuroda isn’t likely to announce fresh monetary easing or other bazooka-like steps.”

On Thursday, the ECB kept interest rates unchanged, but bank chief Mario Draghi highlighted worries about weak inflation in pledging to reconsider monetary stimulus levels in March. Sentiment improved also following a 4.2% rise in U.S. oil prices to $29.53 a barrel, a move partly seen as a technical bounce following Wednesday’s sharp decline to a 12-year low. The dollar rose to 118.00 yen from 117.66 yen Thursday in New York, giving a lift to Japan’s exporters.

A cheaper yen boosts their overseas profitability, supporting share buying in those firms.

© 2016 AFP