The Bank of Japan joins the central bank stimulus parade and Asian stocks move up

09/19/2012 5:01 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

The Bank of Japan, the country’s central bank, has joined the global parade of central banks moving to stimulate domestic economies. In the case of the Bank of Japan the move wasn’t unexpected although the timing is more aggressive than economists had projected. Most thought the move wouldn’t come until October.

The Bank of Japan didn’t cut interest rates—with short-term rates at 0% that would have been quite a trick. Instead it expanded Japan’s version of quantitative easing by increasing its asset-buying program by 10 trillion yen ($128 billion.) The new funds will go to purchase government bonds and Treasury bills.

The Bank of Japan also cut its forecast for the country’s economy from last month. Then the central bank said that the economy was starting to pick up moderately on climbing domestic demand. Today the bank said the recovery had paused.

After the announcement Tokyo’s Nikkei stock index rose to a four-month high before closing at 9232.21, up 1.19%. Investors saw the expansion of the bank’s program of quantitative easing as likely to depress the yen. Worries had been mounting recently that a stronger yen would start, again, to hurt Japanese exporters.

The Bank of Japan’s action has also helped stock markets across Asia. Stronger demand from Japanese exporters for components and sub-assembly work done outside of Japan is good news for technology and consumer electronics companies from Thailand to China. For the day, the Malaysian market was up 0.35%, Singapore was up 0.25%, and Thailand was up 0.99%.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund did not own shares of any stock mentioned in this post as of the end of June. For a full list of the stocks in the fund as of the end of June see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/

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