- May 17, 2013
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Dow Hits Record as Stocks Rise Worldwide on Japanese Stimulus
Friday's gains were driven by the Bank of Japan, which surprised investors by announcing it would increase its bond and asset purchases by 10 trillion yen to 20 trillion yen ($90.7 billion to $181.3 billion) to about 80 trillion yen ($725 billion) annually. The announcement came after data showed that the world's third-largest economy remains in the doldrums, with household spending dropping and unemployment ticking up.
Japan's move comes only two days after the U.S. Federal Reserve brought an end to its own bond-buying program. Investors have been hopeful that the European Central Bank might also start buying bonds to stimulate that region's economy by keeping interest rates low and injecting cash into the financial system. That form of stimulus is called quantitative easing, also known among investors as "QE."
"The Japanese central bank has taken the QE baton from the Fed, and equity traders couldn't be happier," said David Madden, market analyst at IG.
Japan's stock market rose 4.8 percent to the highest level since 2007.
The Japanese currency weakened dramatically following the Bank of Japan's announcement. The yen slumped 2.6 percent against the dollar to 112 yen. The yen is trading at the lowest level in more than five years. Japanese companies typically like a weak Japanese yen because it makes their exported goods cheaper abroad.
European stock markets rose broadly following the Bank of Japan's announcement on hopes that the ECB could be tempted to follow Japan's lead in stepping up stimulus measures. However, few think anything will be announced at the ECB's next policy meeting next Thursday.
"The willingness of the Bank of Japan to ease further in the fight against deflation will encourage those who think the ECB should be doing the same," said Julian Jessop, chief global economist at Capital Economics.
Friday's gains were driven by the Bank of Japan, which surprised investors by announcing it would increase its bond and asset purchases by 10 trillion yen to 20 trillion yen ($90.7 billion to $181.3 billion) to about 80 trillion yen ($725 billion) annually. The announcement came after data showed that the world's third-largest economy remains in the doldrums, with household spending dropping and unemployment ticking up.
Japan's move comes only two days after the U.S. Federal Reserve brought an end to its own bond-buying program. Investors have been hopeful that the European Central Bank might also start buying bonds to stimulate that region's economy by keeping interest rates low and injecting cash into the financial system. That form of stimulus is called quantitative easing, also known among investors as "QE."
"The Japanese central bank has taken the QE baton from the Fed, and equity traders couldn't be happier," said David Madden, market analyst at IG.
Japan's stock market rose 4.8 percent to the highest level since 2007.
The Japanese currency weakened dramatically following the Bank of Japan's announcement. The yen slumped 2.6 percent against the dollar to 112 yen. The yen is trading at the lowest level in more than five years. Japanese companies typically like a weak Japanese yen because it makes their exported goods cheaper abroad.
European stock markets rose broadly following the Bank of Japan's announcement on hopes that the ECB could be tempted to follow Japan's lead in stepping up stimulus measures. However, few think anything will be announced at the ECB's next policy meeting next Thursday.
"The willingness of the Bank of Japan to ease further in the fight against deflation will encourage those who think the ECB should be doing the same," said Julian Jessop, chief global economist at Capital Economics.
