Asia stocks lose steam as Japan flip-flops to loss

SYDNEY (MarketWatch) — Asia stocks mostly retreated from early highs in a messy trading day Tuesday, with the Tokyo market performing a flip-flop back into losses as initial enthusiasm for Bank of Japan’s monetary-policy plans gave way to selling. Japan’s Nikkei Stock Average JP:100000018 -0.35% went on a roller-coaster ride, ending the morning session in negative territory ahead of the central bank news, then surging to a 0.7% gain after the announcement, only to do a sharp about-face 15 minutes later, tumbling to a 1.2% loss. By late in the trading day, the index was off its lows, down 0.5%. Moves were less pronounced in other markets, with South Korea’s Kospi KR:SEU +0.49% down 0.1%, and Australia’s S&P/ASX 200 index AU:XJO +0.03% flat. In China, Hong Kong’s Hang Seng Index HK:HSI +0.19% rose 0.2%, while the Shanghai Composite Index CN:000001 -0.30% was flat. Click to Play Frustrated Chinese investors turn to stocks abroad Beijing has been raising the limits on the overseas portfolios of Chinese investors, who have grabbed the opportunity to sink more money into foreign markets. Japanese stocks were buffeted though the session by expectations leading up to — and then reaction to — the Bank of Japan’s announcement Tuesday that it would introduce open-ended monetary easing and a formal 2% inflation target. Read: Bank of Japan to adopt 2% inflation target Markets had been expecting the central bank to set out such an inflation target, as well as to announce more asset purchases and outline closer cooperation with the government. But there had been some doubt that Japan would introduce open-ended easing, with Barclays Capital calling it a “less likely scenario” before the decision. “I don’t think that there was anything in the announcement that suggests the markets have been wrong in their assessment” of Japanese central-bank moves to fight deflation and support the economy, said AMP Capital Investors head of investment strategy Shane Oliver. “Markets have bought into this, and now that it’s happened there’s a bit of profit-taking,” he said. “I see this as a bit of a correction,” Oliver said, tipping more gains for Japan’s stocks should consumer prices begin to approach the new target. “A huge chunk of money is going to be pumped into the Japanese economy,” Oliver said. “It’s a major policy development to add to other major developments” such as U.S. fiscal issues and a delay to implementation of Basel III reforms. Japanese stocks had already rallied substantially in recent weeks on expectations of aggressive easing, which had worked to depress the yen. Reaction to the news was similar in the currency markets to that seen in the stock market. The dollar USDJPY -0.47% jumped to ¥89.97 Tuesday — briefly topping the ¥90 level — after the policy announcement, to trade more than 13% above where it stood three months ago. But the currency soon reversed, shaving almost an entire yen off the rate, which fell to ¥89.06. As a result of the forex moves, exporters saw some losses in the afternoon, with Komatsu Ltd. JP:6301 -1.15% KMTUY +1.28% down 1.1% and TDK Corp. JP:6762 -1.51% TTDKF -4.55% retreating 1.8%.