Asia report: Markets mostly rise as Bank of Japan holds rates

(Sharecast News) - Asia-Pacific markets mostly advanced on Friday, tracking gains on Wall Street as geopolitical concerns eased and investors digested central-bank signals across the region, led by Japan after the Bank of Japan left policy settings unchanged.

As Patrick Munnelly, market strategy partner at TickMill, noted, "Asian markets advanced, while the dollar continued to struggle as investors turned their attention to non-US assets amidst policy uncertainties and geopolitical tensions," adding that the MSCI Asia Pacific Index climbed 0.4% as investors increasingly rotated away from US assets.

Tokyo in the green as BoJ holds rates

Japanese equities closed higher after the central bank held its key policy rate at 0.75% ahead of a snap election.

The Nikkei 225 rose 0.29% to 53,846.87, with Nintendo up 4.52%, Chugai Pharmaceutical gaining 4.2% and Shionogi & Co advancing 4.13%, while the Topix added 0.37% to 3,629.70.

Munnelly said "Japanese stocks surged, and the yen weakened after the Bank of Japan kept its policy rate steady at 0.75%, in line with expectations," noting that the central bank also "raised its growth outlook and maintained its inflation forecasts on Friday."

Japan's 40-year government bond yield slid more than four basis points to 3.953% after hitting a record high earlier in the week, even as shorter-dated yields climbed, with the 10-year yield rising around two basis points to 2.259% and the 20-year edging up to about 3.204%.

Munnelly observed that "bond futures took a hit following the BoJ's upward revision of its inflation forecast," underscoring ongoing sensitivity to policy guidance at the long end of the curve.

Speaking after the decision, Bank of Japan governor Kazuo Ueda said it was still too early to fully assess the impact of past rate increases, adding that financial conditions remained accommodative and that demand for funds continued to rise moderately - a point echoed by Munnelly, who said Ueda highlighted that "despite the recent December hike, demand for corporate funding is growing, and banks remain active in lending."

The decision came as prime minister Sanae Takaichi dissolved the Lower House ahead of an 8 February election.

Recent data showed Japan's headline inflation slowed sharply to 2.1% in December, the lowest since March 2022, while core inflation was 2.4%, in line with expectations.

China stocks also finish firmer

Chinese markets also finished higher, with the Shanghai Composite up 0.33% at 4,136.16 and the Shenzhen Component gaining 0.79% to 14,439.66.

Raytron Technology surged 20%, Ningbo Ronbay New Energy Tech jumped 19.36% and Gansu Jiu Steel Group Hongxing Iron & Steel rose 10.11%.

In currency markets, Munnelly highlighted that "China's central bank raised the yuan's daily reference rate beyond the closely watched seven-per-dollar threshold for the first time since 2023," adding to pressure on the US dollar.

In Hong Kong, the Hang Seng Index added 0.45% to 26,749.51, led by Xinyi Solar Holdings, which climbed 11.15%, Pop Mart International Group, up 6.6%, and New Oriental Education and Technology, which rose 3.75%.

South Korean stocks outperformed, with the Kospi 100 advancing 0.66% to 5,572.56.

KakaoPay soared 29.89%, Mirae Asset Daewoo Securities rallied 16.58% and KakaoBank gained 9.81%.

Munnelly said emerging market equities were also buoyant more broadly, noting that "emerging market stocks hit record highs as well," supported by capital flows away from US assets.

Sydney marginally higher, Wellington falls on inflation data

Australian shares ended marginally higher, with the S&P/ASX 200 up 0.13% at 8,860.10.

Life360 surged 27.37%, Regis Resources climbed 10.16% and Greatland Resources added 7.64%.

Flash PMI data pointed to accelerating momentum, with the manufacturing PMI rising to 52.4 in January from 51.6 in December, the services PMI jumping to 56.0 from 51.1 and the composite PMI increasing to 55.5, its joint-highest level since April 2022.

The Australian dollar held near a 16-month high around as strong jobs data and upbeat PMI readings supported expectations of a near-term rate hike, with Munnelly noting that "the dollar extended its losses after experiencing its steepest drop in a month," helping underpin risk assets and commodity-linked currencies.

New Zealand was the regional laggard after inflation data reinforced rate-hike risks.

The S&P/NZX 50 fell 0.8% to 13,448.24, with Pacific Edge down 4.26%, A2 Milk Company lower by 2.82% and Infratil off 2.61%.

Consumer prices rose 3.1% year on year in the fourth quarter, above the Reserve Bank's 1% to 3% target band and slightly ahead of expectations, while quarterly inflation printed at 0.6%.

Dollar broadly weaker as oil prices rise

In currency trading, the yen strengthened slightly, with the dollar down 0.14% on the yen to last trade at JPY 158.19, while it slipped 0.07% against the Aussie to AUD 1.4610 but rose 0.48% on the Kiwi to change hands at 1.6951.

Oil prices moved higher, with Brent crude futures last up 1.33% on ICE at $64.91 per barrel, and the NYMEX quote for West Texas Intermediate gaining 1.4% to $60.19.

Reporting by Josh White for Sharecast.com.