TOKYO – Asian shares rose on Monday after the Bank of Japan said it would take all necessary steps to stabilize markets in the face of the coronavirus epidemic.
Coming after similar comments from the U.S. Federal Reserve on Friday, the comments prompted speculation of coordinated central bank action.
In an emergency statement, Bank of Japan Gov. Haruhiko Kuroda said financial markets have made “unstable movements” due to uncertainty over the economic impact of the epidemic.
The central bank “will monitor developments carefully, and strive to stabilize markets and offer sufficient liquidity via market operations and asset purchases,” he said.
By early afternoon, Japan’s Nikkei 225 index, South Korea’s Kospi and Hong Kong’s Hang Seng index were up about 1 percent, while the Shanghai Composite Index was up nearly 3 percent.
On Friday, Federal Reserve Chairman Jerome Powell said the U.S. central bank would “act as appropriate” in response to “evolving risks,” comments that provided some support to the U.S. stock markets at the end of a very bad week for share prices.
Markets are already pricing in interest rate cuts this week by the Reserve Bank of Australia and the Bank of Canada, and expectations are running high for the Fed to also cut at or even before its next meeting on March 17-18, traders say.
Goldman Sachs economists said in a note that Powell’s statement “strongly hints” at a rate cut as well as the likelihood of coordinated action, Reuters reported. “We suspect that they view the impact of a coordinated move on confidence as greater than the sum of the impacts of each individual move,” they said.