BoJ influences Tokyo Stock Exchange to start the week higher

  •   28/04/2020 - 13h56
  •   DEHOUI Lionel

As the week just started looks busy, the Tokyo Stock Exchange ended up higher on Monday. This means that it is bathed in green at the beginning of the week, due to asset buyback programs boosted by the Bank of Japan. The consequence is direct on the Asian continent, but let's start with the indices.

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BoJ influences Tokyo Stock Exchange to start the week higher
Image copyright: Dick Thomas Johnson - Flickr

The Nikkei and Topix are progressing

Indeed, Japan's flagship index, the Nikkei, started the week with a very high jump of +2.7% to 19 782.22 points. In addition, the expanded Topix index picked up a few points on Monday and rose by 1.83% to 1 447.25 points. The cause of these progressions was well evoked by one of the brokers of IwaiCosmo Securities in the person of Toshikazu Horiuchi. According to him, the various BoJ announcements are seen as good news.


BoJ increases share buybacks

Toshikazu Horiuchi nevertheless specified that the multiple announcements in question were widely anticipated. It is therefore logical that the Bank of Japan will no longer set any limits on public bond buybacks. At the same time, the Japanese monetary institute has increased its limit for corporate debt buybacks in one year. This increase is valid for both the long and short term.

In doing so, the BoJ is easing the conditions for companies to qualify for its loans. The BoJ will make use of the scheme, which has been in place since March. Similarly, the hopes raised by a possible recovery in US economic activity have benefited the BoJ. The European situation of a gradual deconfinement due to the ebb of the pandemic also had the same effects.


Tokyo market overview

The situation of the Tokyo Stock Exchange is looking good for almost all its fields of activity. Indeed, these last ones all found themselves in progression this Monday within the Nikkei. This is evidenced by the values of the industrial and real estate sectors as well as that of electronics and new technologies. However, the same cannot be said for the players in the energy distribution sector, which is lagging behind.

For example, the TAKENA group specialising in the pharmaceutical sector in Japan (+2% on Friday) continued to grow. On Monday, it made a gain of 5.2% at 3 986 yen. On the other hand, the group plans to proceed with the sale of its Japanese activity concerning non-prescription drugs (OTC). The price of this sale would be 400 billion yen or EUR 3.4 million.

Note: The TAKENA Group's policy has been quite different since 2019 when it made the colossal takeover of the Shire laboratory in Ireland. It has been aiming to reduce its level of debt since then and that's why it has been deleveraging assets on a regular basis. For him, they are no longer strategic assets. The sale carried out by the group in favour of the Danish group Orifarm and announced last Friday is only one proof.


Oil and currencies

The situation on the oil market is getting worse and worse as oil prices continue to fall. Meanwhile, world demand remains at half mast. This Monday, the barrel of London Brent crude oil dropped another 6.44% to $20.06 and that of WTI crude oil fell drastically by 15.35% to $14.34.

Furthermore, the yen is at a disadvantage against the dollar even though it is gaining value against the euro. On Monday, the dollar was trading at 107.16 yen (107.51 on Friday) and the euro was trading at 116.20 yen (116.36 on Friday). But 1 euro was worth $1.0844 (10 823 on Friday). The euro is thus in progression against the dollar.