Upending expectations, finance ministers and central bank governors from the world’s largest economies gave their blessing this weekend for Japan’s monetary easing, which has driven the value of the yen against the dollar down more than 20 per cent since October.
That sent Japan’s Nikkei 225 index to its highest close in nearly five years, encouraging other stock markets to follow suit.
In mid-morning trading in Europe, the FTSE index of British shares rose 0.8 per cent to 6,337. France’s CAC-40 was up 0.5 per cent at 3,669, and Germany’s DAX jumped 0.7 per cent to 7,510 after EU statistics showed government deficits across the 17-country eurozone declined in 2012. However, the figures also showed deficits rose in countries imposing the toughest austerity measures, such as Greece, Spain and Portugal.
Ahead of Wall Street’s open, S&P futures were up 0.6 per cent at 1,556, while Dow futures rose 0.5 per cent to 14,538.
Earlier in Asia, the Nikkei closed 1.9 per cent higher at 13,568.37. South Korea’s Kospi added one per cent to 1,926.31, and Hong Kong’s Hang Seng closed 0.1 per cent higher at 22,044.37. Australia’s S&P/ASX 200 rose 0.7 per cent to 4,966.60. Shares in mainland China were mixed.
“We are high on Hopium, know it and need a clear miss on upcoming PMI’s for the divergence between extreme hopes and reality to sink in,” said Sebatian Galy, an analyst with Societe Generale. The PMI survey of the manufacturing for the countries that use the euro will be released today.
The decline of the yen has stirred up concerns among Japanese exporters’ key rivals, such as the US and South Korea that Japan’s real goal is to weaken the yen as a way to gain trade advantages. But officials at the G-20 meeting were reluctant to voice any opposition to the Bank of Japan’s monetary stimulus programme.
Other countries may now feel free to rein in their own currencies.
“The rapid weakening of the yen, as a direct result of the ultra-loose monetary policy, has led to suggestions that the BoJ would be warned about future easing, which could prompt other central banks to act in order to limit the appreciation of their own currency,” said Craig Erlam, a market analyst with Alpari Research.
The euro was fairly even against the greenback on Monday at $1.3048.
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