JAKARTA - The Nikkei stock index briefly broke through the 70,000 level for the first time on Tuesday after the Bank of Japan (BOJ) raised its benchmark interest rate to 1 percent. The market responded positively because the decision was in line with expectations.
Based on a Kyodo News report quoted Tuesday, June 16, the Nikkei 225 closed up 87.00 points or 0.13 percent to 69,404.50. Previously, the Tokyo Stock Exchange's main index had touched 70,020.68 and set a new record.
The rise came after the market had weakened at the start of trading. Investors initially waited for the BOJ's decision. After the central bank announced the interest rate hike, stocks turned up and the Nikkei jumped more than 700 points.
However, the strengthening shrank towards the end of the session. Some investors chose to take profits after the Nikkei passed the psychological level of 70,000.
The Topix index, which reflects broader stock movements, fell 8.46 points or 0.21 percent to 3,991.14. This difference in direction shows that the strengthening of the market is still supported by large technology stocks, not a uniform increase in all sectors.
On the Tokyo Stock Exchange's Prime Market, non-ferrous metals and consumer loans were the main drivers. On the other hand, mining, construction, and wholesale trade stocks pressured the market.
The US dollar was stable in the range below 160 yen as the BOJ's interest rate hike was already in the market participants' estimates. At 17:00 Tokyo time, the dollar was at 160.22-160.24 yen.
The euro was trading at 1.1595-1.1596 dollars and 185.78-185.82 yen, according to market data reported by Kyodo News.
Meanwhile, the yield on Japanese government bonds with a 10-year tenor rose 0.070 percentage points to 2.645 percent. The yield on bonds is the rate of profit that investors receive from debt securities.
The rise in yields comes amid concerns that the BOJ could be late in responding to inflation, after one of the policy board members opposed the decision to raise interest rates.
"Because the statement after the meeting did not show special caution against rising prices, there was a sense of relief," said Masahiro Ichikawa, head of market strategy at Sumitomo Mitsui DS Asset Management Co., as quoted by Kyodo News.
Large-cap technology stocks remained strong, following the rise in similar stocks in the United States. The global technology rally in recent times has also lifted the Nikkei, which is largely supported by technology emitters.
A day earlier, the Nikkei had risen by about 3,300 points and set an intraday and closing record high. The rise came after the United States and Iran reached an agreement to end the war.
"The rise in Nikkei is still sharp, which in a certain sense somewhat distorts the market," said Shota Sando, a stock market analyst at Tokai Tokyo Intelligence Laboratory Co.
According to Sando, investors still tend to sell other stocks and buy technology stocks. This pattern makes the Topix lag behind the Nikkei.
Nikkei broke through the 70,000 level less than two months after hitting 60,000. This rapid surge shows that the rally of Japan's main index is still strong, even though the strengthening has not been evenly distributed across markets.
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