Japanese stocks jumped more than 2.5% at the end of trading on Monday, March 18, amid anticipation of the decision of the Bank of Japan's Monetary Policy Committee tomorrow, Tuesday.
At the end of the session, the Nikkei index rose by about 2.7% to 39,740 points, the largest daily increase since February 13.
The broader Topix index also rose 1.9% to 2,721 points.
Bigger-than-expected wage increases by Japan's major companies have boosted the chance that the Bank of Japan will abandon its eight-year negative interest rate policy at the end of a two-day monetary policy meeting that ends on Tuesday.
Reuters reported that if the Bank of Japan's nine-member board sees conditions as favorable, overnight interest rates will be its new target and will be set at a range of zero to 0.1 percent by paying 0.1 percent interest on excess reserves held by financial institutions.
But the Bank of Japan is expected to issue guidance pledging to keep monetary conditions accommodative for now to reassure markets that it will not shift to a path of continuous interest rate hikes similar to those seen in the US and Europe.
Once it abandons its negative interest rate policy, the Bank of Japan will also give up its control over bond yields and stop buying riskier assets such as exchange-traded funds.
