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Nikkei jumps to closing high on Fed tapering

JIJI

The Nikkei 225 stock average soared to a new year-to-date closing high Thursday after Wall Street surged on the decision by the U.S. Federal Reserve to start tapering its asset purchasing program in January.

The Nikkei rose 271.42 points to end at 15,859.22, beating the previous closing high for the year set on Dec. 3 and the highest finish since Dec. 12, 2007. The Topix finished 12.58 points higher at 1,263.07.

The TSE rose from the outset after U.S. stocks rebounded sharply on the Fed’s decision to slow the pace of its asset purchase program. After a two-day Federal Open Market Committee meeting, the Fed said it will start cutting its asset purchase program in January to $75 billion per month from $85 billion.

The Fed’s decision took many by surprise because the consensus had been that the U.S. central bank would start tapering its monetary stimulus later.

The decision removed uncertainty from the market, putting an end to the guesswork over when the tapering would start, brokers said. Also, investors were relieved by the Fed’s message that it will keep interest rates low for some time, they said.

The Fed said in a statement that “it likely will be appropriate to maintain the current target range for the federal funds rate well past the time” that the unemployment rate declines below 6.5 percent, especially if projected inflation continues to run below its 2 percent goal.

“It was a market-friendly decision,” said Ryuta Otsuka, strategist at Toyo Securities Co.

Although the tapering decision came earlier than expected, the reduction won’t be drastic, with the size limited to a mere $10 billion, he said.

With the Fed pledging to keep interest rates low, global financial markets will continue to be flooded with money, an official at a bank-affiliated brokerage said. Such excessive funds will inevitably flow into risk assets like stocks, he said.

Advancers beat decliners 894 to 692 in the first section, while 187 issues were unchanged. Volume rose to 2.862 billion shares from 2.528 billion Wednesday.

JGBs move lower

Japanese government bonds dropped Thursday due to the yen’s decline and higher stock prices.

The lead March futures contract on 10-year JGBs finished down 0.20 point from Wednesday at 143.93.

Volume rose to 34,034 contracts from 27,193.