* Central bank flags inflation risks without signalling
urgency to tighten
* Yen steady near 160-per-dollar level seen as danger zone
for intervention
* AI-related shares buoy Nikkei even as majority of
components decline
(Updates with BOJ Uchida's comments, closing stock prices)
By Kevin Buckland
TOKYO, June 16 (Reuters) - Japan's Nikkei share average rose
to a record high on Tuesday after the Bank of Japan raised
interest rates as widely expected, without signalling urgency
for further tightening in monetary policy.
Japanese government bonds slid after the decision to raise
the key rate by a quarter point to 1%, while the yen remained
largely flat at around 160 per dollar, a level that traders see
as a line in the sand for currency intervention by Japanese
officials.
The Nikkei ended the day with a 0.1% gain to close
at 69,404.50, although it earlier jumped as much as 1% to reach
70,020.68 for the first time.
The broader Topix, however, lost 0.2% on the day to
finish at 3,991.14, after initially flipping to gains following
the policy announcement, but then retracing that advance.
"Price rises are broadening, and there is a risk that
underlying inflation may deviate from our target," whereas "the
risk of a sharp deterioration in the economy has diminished,"
BOJ Deputy Governor Shinichi Uchida said at a news conference
that began at the same time the stock market closed. He said
there was no proposal for a half-point rate hike at the meeting.
The BOJ's decision to raise rates for the first time since
December came during the trading break for stocks and bonds, and
had little initial effect on the yen. Japan's currencyoscillated
in a narrow range slightly on the weaker side of 160 per dollar
, last changing hands at 160.32.
"The BOJ delivered what markets expected," said Charu
Chanana, chief investment strategist at Saxo. "But the reaction
shows this was not hawkish enough to force a major yen
repricing."
The central bank "is still moving in a very gradual way and
continues to say financial conditions will remain
accommodative," she added. "This is mildly supportive for
Japanese equities because the BOJ is tightening, but not in a
way that threatens liquidity or earnings."
Of the Nikkei's 225 components, 78 rose versus 144 that
fell, with three ending flat.
Several heavily weighted AI stocks had an outsized impact in
buoying the market. Chip-testing machinery makers outperformed,
with Advantest ( ADTTF ) gaining 3.1%, as did data centre plays,
with Fujikura ( FKURF ) and Furukawa Electric ( FUWAF ) up 9% and
4.9%, respectively.
Benchmark 10-year JGB futures lost 0.49 yen to
127.77 yen as of the end of the regular session. The yield on
the 10-year cash bond was 7 basis points (bps)
higher at 2.655%. Yields rise when bond prices fall.
Moves elsewhere on the curve were more muted, with the
two-year yield adding 1 bp to 1.405% and 30-year
yields rising 3 bps to 3.775%.
Prior to Tuesday, yields had been declining over the past
several weeks from record highs, with inflation fears receding
amid optimism for a near-term end to the Iran war.
"In a scenario where inflation accelerates or the yen
weakens further, bringing forward the timing of the next rate
hike could come into view," said Hirofumi Suzuki chief FX
strategist at SMBC.
Currently though, "the BOJ is likely to continue raising
rates at a gradual pace of around once every six months to one
year," he said.