Asia report: Markets fall as Bank of Japan holds policy steady

Equities were down across the board in Asia on Thursday, as Japan’s central bank stood pat on monetary policy, and oil prices fell.

In Japan, the Nikkei 225 was down 0.96% at 28,820.09, as the yen strengthened 0.11% against the dollar to last trade at JPY 113.70.

It was a negative session for the benchmark’s major components, with automation specialist Fanuc sliding 8.66%, fashion firm Fast Retailing slipping 0.59%, and technology conglomerate SoftBank Group 2.69% weaker.

The broader Topix index was off 0.7% by the end of trading in Tokyo, finishing at 1,999.66.

In its latest decision on Thursday, the Bank of Japan kept interest rates on hold and its monetary policy steady, as expected.

The central bank also took the secateurs to its economic outlook, trimming its GDP growth expectations and consumer inflation forecasts for the 2021 financial year.

Fresh data was also on the agenda in Tokyo, with official retail sales numbers falling 0.6% year-on-year in September.

“One of the main narratives of the last few months has been how central banks might start paring back their emergency stimulus programs, without causing significant market disruption,” said CMC Markets chief market analyst Michael Hewson.

“This month the Reserve Bank of New Zealand appeared to set the ball rolling by raising its main cash rate by 25 basis points to 0.5%, in response to rising inflation expectations.

“This action has prompted speculation as to who might be next, and while the Federal Reserve is widely expected to fire the starting gun on paring back its own emergency bond buying programme next week, speculation has been rising as to who might be next to move on rates.”

Hewson said the Bank of Canada yesterday ended its own bond buying programme, while there was speculation that the Reserve Bank of Australia could do the same next week, and the Bank of England could also act to nudge rates higher by the end of the year.

“The only two central banks who don’t look anywhere near calling to a halt to their own emergency programs are the Bank of Japan, who met earlier today, and the European Central Bank, who are due to announce their decision later, although there aren’t any surprises expected.

“The Bank of Japan has been trying to engineer higher inflation for over 40 years, with little success,” he said.

“At the last meeting the central bank painted a bleaker outlook for exports and output, due to the various supply chain disruptions, and factory shutdowns which have blighted the economy in the past few weeks”

On the mainland, the Shanghai Composite fell 1.23% at 3,518.42, and the smaller, technology-heavy Shenzhen Composite was 1/47% weaker at 2,362.24.

South Korea’s Kospi slipped 0.53% to 3,009.55, while the Hang Seng Index in Hong Kong was 0.28% weaker at 25,555.73.

The blue-chip technology stocks were on the front foot in Seoul, with Samsung Electronics ahead 0.86% and SK Hynix jumping 4.93%.

Oil prices were still below the waterline as the region went to bed, with Brent crude last down 0.71% at $83.98, and West Texas Intermediate losing 0.67% to $82.11 per barrel.

In Australia, the S&P/ASX 200 lost 0.25% to 7,430.40, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was behind by 0.38% at 12,970.99.

The down under dollars were in a mixed state against the greenback, with the Aussie last 0.11% weaker at AUD 1.3316, while the Kiwi strengthened 0.07% to last trade at NZD 1.3939.