Shares of Japan’s major lenders retained their advance as investors assessed the Bank of Japan’s decision to adjust stimulus to allow long-term bond yields to edge higher.
The Topix’s index that tracks banks pared gains to 0.5% from more than 3%, as benchmark 10-year bond yields retreated from a decade high. Lenders jumped earlier in the day on a report the BOJ would discuss a further tweak of its yield-curve control program at Tuesday’s policy meeting. Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. held gains after fluctuating following the BOJ’s policy announcement.
“Because the BOJ kept its peg on the short-term side of the yield curve, the immediate benefit to bank net interest income is limited,” said Michael Makdad, an analyst at Morningstar Inc. in Tokyo. “I think there is some benefit to banks from long-term yields rising, although the first effect is unrealized losses on bonds they already hold.”
The BOJ will take a more flexible approach to controlling yields on 10-year government debt, according to its statement Tuesday. That marks a shift from a previous pledge to conduct daily bond buying operations at 1%, a stance that effectively drew a line in the sand at that level.
The centraal bank described 1% as a reference point in its latest statement. The BOJ left its negative interest rate untouched.
