Nikkei jumps to 7-year high after BOJ's policy shock, GPIF hopes
* Nikkei posts 7.3 pct weekly gain, 1.5 pct monthly gain * Weak yen drives exporter shares higher * Abe may use strong market performance as ammunition to stick to initial tax hike plan - traders * Kuroda taking proactive approach - analysts * Hopes GPIF will announce increase in Japan, foreign stocks help mood By Ayai Tomisawa TOKYO, Oct 31 (Reuters) - Japanese stocks soared to levels before the global financial crisis on Friday, after the Bank of Japan stunned markets by easing policy further in a move prompted by slow inflation after an April tax hike dented economic growth. The central bank decided to increase the pace at which it expands base money to about 80 trillion yen per year, up from a previous target of 60-70 trillion yen. The BOJ also decided to increase its purchases of government debt by about 30 trillion yen and extend the average duration of JGB holdings to around 10 years, and decided to triple its purchases of exchange-traded funds and Japan real estate investment trusts. The Nikkei benchmark ended 4.8 percent higher at 16,413.76, the highest closing price since November 2007. It was also the biggest daily percentage gain since June 2013. The BOJ's shock decision also helped the index build a 7.3 percent rise for the week, the best weekly percentage gain in more than a year. For the month, it added 1.5 percent. "Most people thought that easing would start in January, and only a handful people thought that they would do some easing in October," said a senior trader at a foreign brokerage. "It's definitely a surprise." The Japanese economy has been plagued by weak consumption after the government raised the consumption tax in April, prompting government ministers to call on Prime Minister Shinzo Abe to delay a planned second consumption tax increase next year. But the senior trader said that Abe may use the strong stock market performance as ammunition to stick to the initial plan. Analysts also noted the BOJ is moving quickly to spark a turnaround in the economy, which suffered its biggest slump since the global financial crisis in the second quarter. "The central bank acted swiftly before we see more poor data towards the end of the year," said Hisao Matsuura, a senior strategist at Nomura Securities. "Kuroda has not admitted that, but one of the reasons behind the market's sharp rise today was that he took a proactive approach before we see more bad economic (inflation) figures hit by lower oil prices," Matsuura said. At a post-meeting news conference, BOJ Governor Haruhiko Kuroda told reporters that it is important for the central bank to strongly commit to achieving its 2 percent price target. The dollar surged more than 1 percent to a high of 110.67 yen JPY=, its best level since January 2008, lifting exporters. Toyota Motor Corp jumped 3.8 percent, Honda Motor Co surged 4.7 percent and Tokyo Electron Ltd soared 3.8 percent. Financial shares also surged, with Mitsubishi UFJ Financial Group rising 4.0 percent, Sumitomo Mitsui Financial Group soaring 7.2 percent, and Nomura Holdings surging 6.8 percent. PENSION FUND BOOST The market also got a boost from news that the government will approve on Friday targets for the $1.2 trillion Government Pension Investment Fund (GPIF) which aim to increase the ratio of Japanese shares in its holdings to 25 percent form the current 12 percent, sources told Reuters. The target for foreign stocks is also expected to rise from its current 12 percent target, the sources said. "Raising to 25 percent from 12 percent (of Japanese stocks) suggest an impact of 7-8 trillion yen in the Japanese market, a rise from 3-4 trillion yen," said Nobuhiko Kuramochi, a strategist at Mizuho Securities. The broader Topix gained 4.3 percent to 1,333.64, while the JPX-Nikkei Index 400 surged 4.5 percent to 12,172.62. (Editing by Shri Navaratnam)
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