The Nikkei 225 index rebound gathered momentum on Thursday as investors cheered the latest decision by the Bank of Japan (Bo). The index rose by 0.30% to ¥27,740, which was the highest point since June 16th of this year. It has risen by more than 12% from the lowest level in March as the Japanese yen has crashed to the lowest level in 24 years.
Impact of weaker yen on Nikkei 225
The main catalyst for the Nikkei index is the latest interest rate decision by the BoJ. As widely expected, the bank continued being an outlier among other central banks. As a result, the BoJ decided to leave interest rates unchanged at -0.10%. It also reiterated that it will continue offering stimulus in a bid to support the embattled economy.
As a result, the Japanese yen weakened across the board. The USD/JPY rose to a high of 138.15, which is a few points below the highest point this year. The pair has surged by more than 20% this year, making the Japanese yen the worst-performing major currency. Analysts believe that the BoJ will only respond to the falling currency once it rises to about 145.
A weaker yen has an impact on the Nikkei 225. First, many foreign investors like Warren Buffett are seeing the value of their holdings slip in two ways. First, the index has dropped in both yen and dollar terms. Second, many domestic companies have seen the cost of doing business rise since many of them depend on imports. Some of the most affected are companies like Shionogi, Fast Retailing, and Tosoh Corp.