Market update: BoJ adopts 2% target in commitment to end deflation

With US markets closed in observance of Martin Luther King Day, eyes were on Japan as investors awaited policy news from the central bank, which came in the early hours this morning (GMT). The Bank of Japan (BoJ) has doubled its inflation target to 2% – which was largely as expected – but surprised markets by saying it would adopt open-ended asset purchasing from 2014. The BoJ has been under considerable pressure from newly elected Prime Minister Shinzo Abe to be more aggressive with its policy to help end deflation. After a strong run recently, investors took profits in the market (Nikkei -0.4%), notably in exporters including Canon, Toyota Motor and Honda Motor. The yen settled at ¥89.28 versus the US dollar after being as high as ¥90.25.

European shares have opened lower this morning (FTSE Eurofirst 300 -0.2%; FTSE 100 -0.1%), with investors cautious ahead of earnings releases due later today. Google, IBM, Verizon Communications and Johnson & Johnson are due to report, amongst others. To date, the US earnings season had been relatively successful, providing support to markets.  Risers this morning in London include beverages firm SABMiller, which reported that revenue growth had accelerated in the third quarter, and online food company Ocado, which has unveiled Sir Stuart Rose (of Marks & Spencer fame) as its new independent Non-Executive Director.