Japan Market rebounds on stimulus hopes

Headline indices of the Japan share market finished session higher on Monday, 02 March 2020, as investors chased for bottom fishing in recently battered stocks, following a week of sharp sell-offs triggered by the coronavirus outbreak, after the Bank of Japan joined other central banks in pledging all-out efforts to ensure market stability. At closing bell, the 225-issue Nikkei Stock Average advanced 201.12 points, or 0.95%, to 21,344.08, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange added 15 points, or 1%, at 1,525.87.

The Tokyo market rebounded as investors took heart in the Bank of Japan pledging it will ensure market stability and join other major central banks in combating excess volatility as the worldwide spread of the coronavirus has rocked markets.

Bank of Japan governor Haruhiko Kuroda on Monday gave investors a reason not to fear the coronavirus outbreak, issuing a statement declaring that the central bank "will strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases."

The Bank of Japan governor also said it was using a gensaki arrangement to buy 500 billion yen worth of government bonds, its first such operation since 2016, spurring repurchases of futures contracts. In a gensaki arrangement, the buyer promises to sell back the bonds after a specified period. As part of its ultraloose monetary policy, the BOJ has continued to buy JGBs at a pace of around 80 trillion yen a year. It has also been buying exchange-traded funds at a pace of 6 trillion yen a year. Kuroda's statement is aimed at holding back panic in financial markets.

ECONOMIC NEWS: Japan Jibun Manufacturing Contracts At Fastest Pace Since 2016- Japan manufacturing sector contracted at the fastest pace since 2016 as production volumes were adversely affected by delayed input deliveries and reduced demand in February, survey data from IHS Markit showed Monday. The Jibun Bank manufacturing Purchasing Managers' Index fell to 47.8 in February from 48.8 in January, its lowest level since May 2016. The impact of COVID-19 was most apparent in new order intakes. New orders placed with Japanese goods producers fell at the sharpest rate since December 2012.

The combined impact of lower sales and input delivery delays contributed to a further decrease in production volumes in February. However, manufacturers still expect output to be higher in 12 months' time. That said, the degree of optimism eased from January's 18-month high. Meanwhile, employment increased as additional workers were recruited to offset retirements and voluntary resignations. On price front, the survey showed that output prices were cut in a bid by firms to boost competitiveness. The scope for price discounting was helped by input cost inflation easing to a 39-month low.

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