Japan Nikkei tumbles after BoJ widens yield curve control

Japan share market finished lower for fourth straight session on Tuesday, 20 December 2022, as risk sentiments dampened in the wake of the Bank of Japan's unexpected adjustment to its yield-curve control policy.

At closing bell, the 225-issue Nikkei Stock Average index declined by 669.61 points, or 2.46%, to 26,568.03. The broader Topix index of all First Section issues on the Tokyo Stock Exchange dropped 29.82 points, or 1.54%, to 1,905.59.

Total 29 of 33 sectors closed down along with the Topix index. Real Estate was worst performing sector, declining 4.3%, followed by Precision Instruments (down 3.4%), Transportation Equipment (down 3.2%), Electric Appliances (down 2.8%), and Information & Communication (down 2.4%).

The Bank of Japan held its benchmark interest rates steady and announced it will expand the range of 10-year Japan government bond yield fluctuations from its current plus and minus 0.25 percentage points to plus and minus 0.5 percentage points. The adjustment is intended to improve market functioning and encourage a smoother formation of the entire yield curve, while maintaining accommodative financial conditions, the BOJ said.

The impact of the BOJ's shift will likely ripple through global markets for the remainder of the year and into 2023. Japanese investors, who are among the biggest holders of Treasuries and major players in European debt, now have more incentive to bring money home. Meanwhile, the stronger yen makes Japanese stocks more expensive for overseas buyers.

CURRENCY NEWS: The Japanese yen stood at 133.25 against US dollar in Asian trade on Tuesday, appreciated 2.7% from yesterday's close of 136.88, after trading in the range between 132.68-137.48. The sharp appreciation of yen came after the Bank of Japan modified its yield curve control tolerance range while holding its ultra-low benchmark interest rates steady.

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