The Bank of Japan held rates as expected but announced it would accelerate its divestment of Japanese exchange-traded funds, reducing the unwinding timeline to 43 years from 112 years previously. The central bank has spent 37.19 trillion yen through March 2024 on these stock purchases.
Markets responded with sharp declines across Asia. Japan's Nikkei fell 3% at one point. China's blue-chip index headed for its largest monthly fall in a decade amid concerns about weakening demand for chips and AI-related inputs. Investors shifted to bonds, with 10-year US Treasury yields falling more than 7 basis points in Tokyo trade, set for their largest one-month drop since December 2023. The 10-year Japanese government bond yield dropped 5.5 basis points to 2.780%, its lowest close since August 6.
Futures signaled weakness ahead in Europe and the US. Euro Stoxx 50 futures fell 0.43%, DAX futures slid 0.2% to 26,107, and S&P 500 e-minis sank 0.89%. FTSE futures rose 0.2%.
Tohru Sasaki, chief strategist at Fukuoka Financial Group and a former BOJ official, said holding such a large share position is "unhealthy for the central bank," and questioned the timing of the divestiture announcement given fragile market conditions.
US earnings from AbbVie, Chevron, Colgate-Palmolive, Dominion Energy, and ExxonMobil Holdings are scheduled, along with European earnings from AstraZeneca, Credit Agricole, and Sanofi. Germany will release import prices, unemployment, and CPI data.
Investors should monitor S&P 500 e-minis, DAX futures, Nikkei, and 10-year US Treasury yields as markets digest central bank policy shifts and earnings reports.