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Topix hits five-year high

Yen weakens to five-year low having lost 17% against the dollar this year

The yen weakened to a five-year low against the dollar and Japan’s Topix closed at the highest since 2008 on speculation the central bank will press ahead with its economic stimulus plan. Turkish stocks dropped after a cabinet overhaul, while US natural gas advanced.

The yen slid 0.4 per cent to 104.76 per dollar at 10:43am London time, after touching 104.84, the weakest level since October 2008, and the Topix rose 1.7 per cent. China’s stocks declined even as the nation’s money-market rates eased. US natural gas gained one per cent and Treasuries ended a two-day decline.

Minutes of last month’s Bank of Japan policy meeting showed one board member said a slowdown in growth could represent a downward shift in trend. In the US, where the Federal Reserve is slowing its bond purchases, analysts said a report on Thursday will show initial jobless claims fell last week.

“The fact that BoJ members are concerned that improvement in growth, jobs, and consumer prices may not be as robust as before signals they will take some kind of measures going forward,” said Takahiro Sekido, who worked at the BoJ before joining Bank of Tokyo-Mitsubishi UFJ Ltd as a Japan strategist. “Dollar-yen could test 105 as economic data in the US continue to improve.”

Markets in Australia, New Zealand, Hong Kong, Indonesia, Germany and the UK were closed on Thursday.

The yen retreated against all but one of its 16 major peers. It dropped 0.4 per cent to 143.41 per euro, after touching 143.54, the weakest level since October 2008. The yield on Japan’s benchmark 10-year note added 1 1/2 basis point to 0.71 per cent, the highest since September 18.

Japan’s currency lost 17 per cent against the dollar this year, the biggest decline among the 16 major currencies after the South African rand’s 18 per cent drop, amid speculation the BoJ will continue unprecedented stimulus that debases the currency, while the Fed pares quantitative easing as the US economy recovers. Bank of Japan Governor Haruhiko Kuroda said Japan is on track to achieve its two per cent inflation target. The central bank buys more than seven trillion yen ($67 billion) of the nation’s bonds every month to battle deflation.

The Topix ended at 1,279.34, the highest level since August 2008, extending this year’s rally to 49 per cent, the most among 24 major developed markets tracked by Bloomberg. Toyota Motor Corp, the world’s biggest carmaker, jumped 2.9 per cent in Tokyo. Nissan Motor Co, which sells more vehicles in China than any other Japanese automaker, said it was “closely monitoring” developments in Japan-China ties after Prime Minister Shinzo Abe visited a shrine memorializing war-dead on Chairman Mao Zedong’s birthday.

US natural gas climbed on speculation of increased demand for the heating fuel. Prices climbed 33 per cent this year. The Standard & Poor’s 500 Index closed at a record high on December 24 after data on US durable goods and new homes sales beat analyst estimates. The gauge has gained 29 per cent this year, on course for its biggest annual advance since 1997.

Shares of Amazon.com Inc and United Parcel Service Inc. may move as the largest online retailer offered refunds on shipping charges after the biggest package-delivery company said overwhelming volume left it unable to deliver some packages by Christmas.

Treasury 10-year yields fell one basis point to 2.97 per cent. Initial jobless claims in the US fell to 345,000 in the period ended on December 21, down from 379,000 the previous week, according to the median estimate of economists surveyed by Bloomberg. The Fed said on December 18 that it will reduce the pace of bond buying amid faster-than-estimated economic growth.

The MSCI Asia Pacific Index rose 0.4 per cent, gaining for an eighth day and poised for the longest rally in three months.

China’s stocks fell, led by coal and auto shares, amid investor disappointment the government didn’t take further measures to ease a cash crunch. Money-market rates eased for a third day. The Shanghai Composite Index lost 1.6 per cent to 2,073.10 at the close, the lowest level since August 23.

The People’s Bank of China didn’t conduct reverse- repurchase operations on Thursday, after injecting funds into the inter-bank market for the first time in three weeks on December 24 to ease a cash crunch.

China’s seven-day repurchase rate, a gauge of funding availability in the banking system, dropped 30 basis points to 5.33 per cent, according to a daily fixing by the National Interbank Funding Center.

The country’s economic growth this year is likely to come in at 7.6 per cent, compared with the government’s 7.5 per cent target, Xinhua News Agency said, citing a report by the State Council. A 7.6 per cent pace would mark a third straight annual drop in the expansion rate.

Australia’s dollar declined against all 16 major peers, dropping 0.4 per cent to 88.90 US cents.