The decision prompted more weakness in the yen, which in turn fuelled a rally in the local equities.
Another boost for equities came from news of plans by the country’s $1.2 trillion public pension fund to ramp up its investments on stocks and reducing its exposure to domestic bonds.
This is part of a wider plan by the government to make Japanese stocks more attractive and accelerate the country’s economic recovery.
Under the new allocation guidelines, Japanese and foreign stocks will each take up 25% of the pension fund’s holdings, up from 12% each previously.
The allocation to domestic bonds will be reduced from 60% to 35%, while the ratio for overseas bonds will rise from 11% to 15%.
How the market reacted
Last Friday, the Nikkei 225, or Japan 225, rose 4.83% to hit a seven-year high at 16,413.76 points. The investor euphoria also spilled over to the rest of the global markets, with the S&P 500 breaking new ground by closing at an all-time high of 2,018.05 points.
Looking at the weekly chart, the Japanese stock index is on an uptrend line. A pullback will make it an attractive entry opportunity as it looks likely to edge up to break above the 17,000 points psychological level. We could then subsequently see the Nikkei test a resistance area at 17,560 points.