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Tokyo: Nikkei plunges after BOJ inaction stuns investors

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[TOKYO] Japanese stocks gave up early gains and took a u-turn that wiped out much of the previous week's four-day rally in a single afternoon after the Bank of Japan disappointed investors by holding off on expanding monetary stimulus.

The Nikkei share average shed 3.6 per cent to end the day at 16,666.05, resulting in a 5.1 per cent decline for the shortened trading, with the market closed for a national holiday on Friday.

The yen soared against the dollar and the euro after the BOJ's announcement, adding to the discomfort of Japanese exporters.

"The market had clearly worked itself into a frenzy of expectations demanding that the BOJ take action, and in retrospect that looks like a misguided view that failed to recognise the dilemma that recent economic dynamics have presented for the BOJ," said Stefan Worrall, director of Japan equity sales at Credit Suisse.

Shares of Kyushu-based banks fell along with a broad swath of financial shares, shrugging off a 300 billion yen (S$3.71 billion) zero-interest loan program announced by the BOJ as a salve for commercial banks in quake-hit areas. Marcel Thieliant, senior Japan economist at research consultancy firm Capital Economics, said in a note that the loan amount was "absurdly small."

Kyushu Financial Group tumbled 6.6 per cent while Fukuoka Financial Group plunged 8.3 per cent, while the broader banking sector shed 6.3 per cent.

Manufacturing automation giant Fanuc Corp slid 9.9 per cent after reporting disappointing earnings, while Nintendo Co Ltd fell 8.3 per cent on weak earnings, outlook and plans to sell its majority stake in the Seattle Mariners Major League Baseball team.

The broader Topix fell 3.2 per cent to end the day at 1,340.55 with each of its 33 subindexes in negative territory. The index ended the week about 4.8 per cent lower.

The JPX-Nikkei Index 400 declined 3.3 per cent to 12,124.68.

REUTERS