Asian stocks were mostly muted on Tuesday as a recent rally from the Federal Reserve seemed to have eased, while Japanese equities rose after the Bank of Japan (BOJ) left its monetary policy rate unchanged to retain its ultra-dovish stance.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.19%, while South Korea’s KOSPI added 0.09%. Chinese markets were in a tight range, with the blue-chip CSI 300 index trading 0.32% lower and the Shanghai Composite sliding 0.42%.
Investors await the People’s Bank of China’s (PBOC) loan primate rate (LPR) decision due on Wednesday, which is widely expected to keep rates on hold.
India’s Nifty 50 index surged 0.05%, with futures seeing a flat open amid a strong outlook for the country’s economy. The trillion-dollar Indian economy has observed the fastest growth since 2022.
Australia’s S&P/ASX 200 climbed 0.84% after minutes from the Reserve Bank of Australia’s (RBA) December meeting showed that the central bank considered a rate hike two weeks earlier before choosing not to due to the prospect of further signals from the economy down under.
Japanese Stocks Rally as BOJ Retains Monetary Policy
Japanese stock markets edged higher on Tuesday after the BOJ maintained negative interest rates at its final meeting this year and announced plans to carry on with its yield curve control (YCC) policy to strengthen the country’s economy.
The Nikkei 225 index increased 1.32% following the central bank’s decision, with the industrial and tech sectors leading the gains.
Japanese equities have found significant support from the BOJ’s ultra-dovish position in 2023, with the Nikkei trading under 33-year highs reached in November.
The BOJ on Tuesday left short-term interest rates at -0.1% and stated that it would continue its asset-buying and monetary stimulus.
The ceiling for the 10-year Japanese Government Bond (JGB) yields also stayed at -1.0% to 1.0% under the YCC measures, although the central bank intends to leave more room for flexibility in yields, possibly over the 1.0% upper limit.
Investors were cautious over cues from the BOJ regarding the time it plans to start tightening policy next year. However, the signals from the central bank about such were insufficient, saying it would keep stimulus amid continued risks to the Japanese economy.
The BOJ remains pressured to tighten monetary policy, seeing the country’s inflation have exceeded its 2% annual target for almost two years. The central bank expects the sticky inflation to persist in the coming months, but its momentum is seen easing.
The focus now will be on the BOJ’s press conference later in the day.
