Tokyo stocks surged Wednesday afternoon on a report that Japan's government will unveil a massive 27 trillion yen ($255 billion) stimulus package to shore up the faltering economy. The benchmark Nikkei 225 index jumped 2.68 percent, or 438.39 points, to 16,821.43 when afternoon trading resumed, as the report by Fuji Television sent the yen into a brief dive, which supports exporters. It had been up 1.39 percent going into the break.
The dollar briefly jumped to 106.54 yen from around 105.01 yen in the morning and 104.64 yen in New York. Japanese Prime Minister Shinzo Abe will announce details of the package Wednesday afternoon, Fuji reported citing an unnamed source. Abe promised a stimulus package, which reports have pegged at being worth anywhere from 10 to 30 trillion yen, after Britain's vote last month to quit the European Union sparked a rally in the yen that threatened profits at Japan Inc.
Traders tend to buy Japan's currency as a safe bet in times of turmoil or uncertainty. The Fuji report comes as speculation swirls that the Bank of Japan will further ease monetary policy after a two-day meeting ends Friday. Japan's economy has been struggling to gain traction with a string of weak readings and sagging business confidence heaping pressure on Tokyo and the central bank to step up to the plate.
"The key is whether the BoJ will surprise us again on Friday," Alex Wong, director of asset management at Ample Capital in Hong Kong, told Bloomberg News. "The Japanese central bank has surprised the market several times in the past few years so they are a little bit unpredictable. There may be a disappointment" if the BoJ fails to deliver extra stimulus, he added. The Nikkei rally looks set to end three straight losses fuelled by profit-taking from a recent rally.
Traders will be watching the Federal Reserve's own policy meeting, which concludes its later Wednesday. While it is not expected to make any major announcements its post-meeting statement will be pored over for clues about policy following a run of strong data that have fanned talk of an interest rate rise. Investors are also keeping tabs on Japan's latest earnings reports, with Nintendo and Nissan among the firms reporting after markets close on Wednesday. SoftBank, Sony and Japan Airlines post results later in the week.