Asia: Equities rally as expectation for further stimulus in Japan mounts

Asian stocks rallied on Tuesday, boosted by news that the Bank of Japan might further loosen its monetary policy this week.

Japan’s Nikkei Stock Average climbed 1%, driven higher by growing expectations for more stimulus measures from the country’s central bank.

“On Wednesday, the Bank of Japan will put forward their policy decision and with inflation not reaching the central banks forecasts, further monetary easing could be on the cards,” said London Capital Group’s analyst Jonathan Sudaria.

Markets in the region continued to benefit from the Trans-Pacific Partnership agreement signed on Monday by the US, Canada, Japan and nine other countries, including Australia.

Crucially for Australia, however, the agreement does not include China, Asia’s largest economy and Australia’s biggest trade partner.

On Tuesday, Australia’s central bank opted in favour of keeping its benchmark interest rate unchanged at a record low of 2%, pushing the country’s S&P/ASX 200 benchmark 0.33% higher.

Meanwhile South Korea’s Kospi advanced 0.63%, while Hong Kong’s Hang Seng Index declined 0.10% and Chinese mainland markets were still closed for a bank holiday.

On the currencies front, the yen climbed 0.13% against the dollar, after falling as low as 120.56 yen to the dollar earlier in the session.

The Australian dollar, meanwhile, rose 0.34% against its US counterpart in the wake of the Reserve Bank of Australia’s decision to keep interest rates unchanged.

“Following the RBA’s policy meeting overnight, the AUD is the best performing G10 currency on a one-day view,” analysts at Rabobank said.

“Although the Bank’s decision to hold interest rates on hold was expected, the lack of dovish references in its statement caught the market off guard.”

Elsewhere, the Indonesian rupiah posted its biggest one-day gain against the dollar in six years, as the greenback continues to come under pressure because of recent doubts over the pace of the economic recovery in the US.

Meanwhile, the Malaysian ringgit climbed to its highest level against the greenback in over a week.