Japanese stocks outperform other markets after Bank of Japan intervenes to weaken the yen

Japan’s Nikkei top riser after yen intervention

LONDON — Japanese stocks jumped Wednesday after the Bank of Japan intervened in the currency markets for the first time in six years to stem the export-sapping appreciation of the yen.

European and U.S. shares, however, were hit by a worse than expected survey into the state of manufacturing industry in and around the New York region.

The Empire State manufacturing index fell to a 15-month low of 4.14 in September from August’s 7.1. The fall was unexpected and raised renewed concerns about the state of the U.S. economic recovery especially after a run of better than anticipated U.S. economic data over the past week or so has helped stocks around the world rally.

In Europe, the FTSE 100 index of leading British shares closed down 0.2 percent at 5,555.56 while Germany’s DAX fell 0.2 percent to 6,261.87. The CAC-40 in France was 0.4 percent lower at 3,755.64.

On Wall Street, the Dow Jones industrial average was up 0.2 percent at 10,542.84 soon after the open while the broader Standard & Poor’s 500 index fell 0.1 percent to 1,119.88.

The main theme of the day in the markets was the Bank of Japan’s first attempt to manipulate the value of the yen since 2004, as Japanese authorities sought to drive their currency’s exchange rate down by selling yen for dollars. The dollar jumped 3.1 percent against the yen, which had recently been trading at 15-year highs against the U.S currency, to 85.59 yen after the intervention. Before the move it had traded as low as 82.87 yen.

Intervention sent the country’s big exporters broadly higher — Toyota Motor Corp. climbed 3.8 percent and Sony Corp. jumped 4.1 percent in Tokyo trade, helping the benchmark Nikkei 225 stock average close up 217.25 points, or 2.3 percent, to 9,516.56. Before the intervention, the Nikkei had been trading lower.

The intervention was unilateral, though authorities around the world were informed about the action.

While the effort to lower the yen’s value against the dollar succeeded on the day, there are doubts whether it can do much in the longer-term given the possibility of further monetary easing by the U.S. Federal Reserve, which would likely weigh on the dollar. There are mounting expectations that the Fed will back the purchase of around $1 trillion worth of bonds later this year in another attempt to breathe life into the faltering U.S. economic recovery.

“Whether it proves a successful gambit remains to be seen, but clearly the policymakers felt that the cost of inaction had begun to outweigh the risks of intervention,” said Daragh Maher, a currency strategist at Credit Agricole.

The intervention came a day after Prime Minister Naoto Kan held onto power after fending off a challenge from veteran lawmaker Ichiro Ozawa for the ruling party presidency. Ozawa had advocated currency intervention, but Kan had until now been reluctant to act.

Movements elsewhere in the currency markets were limited. The euro, for example, was flat on the day at $1.3005.

Stephen Lewis, an analyst at Monument Securities, said he wouldn’t be surprised to see the euro’s rate against the dollar return to the spotlight now that the Japanese monetary policymakers have shown their hand.

“Now that the Japanese authorities have settled the questions when and at what levels the Bank of Japan would intervene, market participants may well move on in search of new themes,” said Lewis.

Elsewhere in Asia, Hong Kong’s Hang Seng index added 0.1 percent to 21,725.64, South Korea’s Kospi rose 0.5 percent to 1,823.88, and Australia’s S&P/ASX 200 added 0.8 percent to 4,661.50. The Shanghai Composite Index retreated 1.3 percent to 2,652.50.

Oil prices fell, with benchmark crude for October delivery down $1.44 at $75.36 a barrel in electronic trading on the New York Mercantile Exchange.