Japanese equities advanced on Thursday, with investors rotating into gaming and pharmaceutical stocks that had recently suffered sell-offs, while a drop in crude oil prices and a broadly expected Federal Reserve policy decision lifted overall market sentiment. The benchmark Nikkei 225 index closed up 0.3% at 64,136.25 points, with the electronic gaming and drug sectors leading the gains across the board.
Brent crude fell 2.6% overnight after reports indicated that Saudi Arabia was offering additional crude cargoes through Oman, which alleviated concerns about potential supply disruptions in the Middle East. In a widely anticipated move, the U.S. Federal Reserve raised its benchmark interest rate by 25 basis points while signaling that one more hike could be possible later this year.
Rate-sensitive technology stocks showed weakness ahead of the Bank of Japan's policy decision due on Friday, where market consensus expects a 25 basis point hike. Meanwhile, in domestic political news, a temporary cabinet meeting was convened by the Japanese government this morning, with all ministers under Prime Minister Takaichi Sanae's cabinet submitting their resignations. According to local media reports, a cabinet reshuffle is set to follow.
The prime minister proceeded with the reorganization today, unveiling a new ministerial lineup that retains several key figures, including Chief Cabinet Secretary Minoru Kihara, Foreign Minister Toshimitsu Motegi, Defense Minister Shinjiro Koizumi, and Finance Minister Katsunobu Kato. In a notable development, Hiroshi Nakajima, former secretary-general of the far-right Nippon Ishin no Kai party, has been appointed as minister in charge of regulatory reform, marking the first time a member of that party has entered the cabinet.
Analysts from the Chinese Academy of Social Sciences' Japan Research Institute commented that with the inclusion of Nippon Ishin no Kai members in the cabinet, the governing partnership between the Liberal Democratic Party and the opposition group shifts from external cooperation to direct participation, which could accelerate the government's rightward tilt. Finance Minister Katsunobu Kato stated on Thursday that she expects the central bank to manage monetary policy in a stable and sustainable manner to achieve the 2% inflation target, adding that she hopes for close communication between the BOJ and the government.
Following the Fed's rate hike on Wednesday, the yen weakened against the U.S. dollar, although the finance minister declined to comment on the currency's movements.