* BoJ policy shift fundamentally alters outlook for Japanese
* Nikkei expected to climb to 14,500, highest since June
* Yen forecast to fall to 102 per dollar by year-end
* Ten-year JGB yield seen at 0.60 pct by end of 2013
By Dominic Lau and Tomo Uetake
TOKYO, April 11 The Bank of Japan's massive
stimulus to pull the economy out of two decades of malaise has
altered the outlook for Japanese assets, according to a Reuters
snap poll of analysts conducted after the central bank shocked
markets with its radical shift in policy.
The bold plan to inject $1.4 trillion into the world's
third-largest economy in less than two years has already pushed
the yen to near 100 to the dollar, lowest since April
2009, and Tokyo's Nikkei to a nearly five-year high.
It caught the market by surprise, forcing many analysts to
revamp their forecasts for the Nikkei, 10-year JGB yield and the
Analysts now expect the Nikkei, up nearly 30 percent so far
this year, to rise 40 percent in 2013 to 14,500, highest since
June 2008, while the yen will likely slide 18 percent against
the dollar to close the year around 102 to the dollar.
Just a month ago, the Nikkei was expected to reach 14,000 by
year-end while the latest Reuters foreign exchange poll
- on April 3 - showed the dollar trading at 98 yen in twelve
If the index were to complete the feast the poll projects,
it would be the biggest annual rise since 2005 and should easily
make the Nikkei the developed world's best performing stock
market this year.
"As the BOJ's 'new dimension of monetary easing' has changed
where the Japanese market is heading, we should reset our
targets in order to maintain our bullish stance on the Japanese
stocks," said Kyoya Okazawa, head of global equities and
commodity derivatives at BNP Paribas in Tokyo.
"The BOJ's easing has take the markets into an entirely 'new
stage', so I believe we too will need to adjust our target
BNP Paribas currently has a year-end target of 13,000 for
the Nikkei, which is about 3.0 percent below where it was early
The benchmark index has surged more than 50 percent since
mid-November, when Shinzo Abe promised expansionary fiscal and
monetary policies, dubbed "Abenomics", to revive the ailing
economy during his election campaign. He was elected prime
minister the following month.
Foreign investors ploughed 6.5 trillion yen ($65.3
billion)into Japanese equities during the same period, according
to data from the Ministry of Finance.
Despite the rally, Japanese equities are slightly cheaper
than their U.S. peers, with a 12-month forward price-to-earnings
ratio of 13.3 versus the S&P 500's 13.5, according to
data from Thomson Reuters Datastream.
DOLLAR TO 102 YEN?
Since mid-November, the yen has weakened around 24
The Japanese currency is expected to fall to 102 yen to the
dollar by the end of this year, its lowest since October 2008
and 2 percent below Thursday's level, a survey of 19 analysts
showed. It hit a near four-year low of 99.88 to the dollar on
"The much-bolder-than-expected monetary easing under new BOJ
Governor Haruhiko Kuroda is set to have a major impact on
domestic and international investment flows," said Yunosuke
Ikeda, chief FX strategist at Nomura.
"Our new target is 100 yen at end-June 2013, 102 at
end-2013, and 106 at end-2014. During second quarter, as asset
allocation peaks, we think overshooting towards 105 is
UBS on Wednesday revised its dollar/yen forecast to 110 yen
by the end of 2013, from 100.
The BOJ's proposed massive foray into government bonds -
buying 7.5 trillion yen of bonds each month - has jolted the
The 10-year yield rose to 0.620 percent on
Thursday morning, from a record low of 0.315 percent hit on
Friday, a day after the central bank announcement.
According to the median forecast of 15 analysts polled by
Reuters, the 10-year yield is seen at 0.60 percent by the end of
2013, down from 0.795 percent at the end of last year. The
forecast ranges from 0.10 to 0.90 percent.
On Wednesday, Mitsui Life Insurance, Japan's fifth-largest
with assets of about 6.5 trillion yen under management, said it
plans to slow the pace of its purchases of long-term Japanese
government bonds, although it aims to increase the duration of
its investment portfolio.
($1 = 99.5050 Japanese yen)
(Additional reporting by Lisa Twaronite in Tokyo, and Sumanta
Dey, Yati Himatsingka and Rahul Karunakar in Bangalore; Editing
by Richard Borsuk)