Asia report: Markets mixed as BoJ holds interest rates

Markets in the Asia-Pacific region finished in a mixed state on Friday, with Japanese reversing earlier losses after the Bank of Japan (BOJ) decided to keep its benchmark interest rate unchanged.

The central bank also expressed caution over its plans to unwind its large-scale stimulus measures.

“The Bank of Japan surprised the market by announcing a plan to reduce bond buying in the future, but the specifics will be revealed at the next meeting in July,” said TickMill market analyst Patrick Munnelly.

“It will continue buying government bonds at the current pace, but details of the tapering plan for the next one to two years will be discussed in July.

“Despite gains in Japan's market, MSCI's Asia Pacific index declined due to losses in Australian and Chinese companies.”

Munnelly noted that mainland China stocks continued to decline for the fourth week, prompting calls for policy loosening by the country's central bank.

“Meanwhile, the S&P 500 set a new record driven by tech stocks, but US stock futures only saw slight gains in Asia.

“The value of the dollar remained stable relative to other major world currencies.”

Markets in mixed state after BoJ decision

In Japan, the Nikkei 225 rose 0.24%, closing at 38,814.56, while the Topix increased by 0.54% to 2,746.61.

Among the top gainers on Tokyo’s benchmark were Fujikura, which surged by 6.3%, Resonac Holdings with a 5.35% increase, and Mitsubishi Heavy Industries, up by 4.43%.

Chinese markets experienced modest gains, as the Shanghai Composite inched up 0.12% to 3,032.63, and the Shenzhen Component rose 0.5% to 9,252.25.

Leading the charge in Shanghai were Citychamp Dartong, which soared by 10.11%, Guangdong Songyang Recycle Resources up by 10.02%, and Guizhou Wire Rope Co, also rising by 10.01%.

Hong Kong's Hang Seng Index declined by 0.94%, settling at 17,941.78.

The drop was led by significant losses in Chow Tai Fook Jewellery Group, down 8.88%, WuXi AppTec, which fell by 5.08%, and WuXi Biologics, decreasing by 3.75%.

South Korea's Kospi saw a slight increase of 0.13%, ending the day at 2,758.42.

Notable performers in Seoul included LG Innotek, which jumped by 7.76%, Hyundai Mobis up by 7.45%, and SK Innovation, which gained 6.47%.

Australia's S&P/ASX 200 declined by 0.33% to close at 7,724.30, with the session's laggards including Deterra Royalties, which dropped by 6.95%, Orora, falling by 4.63%, and Liontown Resources, down by 4.15%.

New Zealand's S&P/NZX 50 edged down by 0.07%, finishing at 11,864.89.

The market's decline was driven by Synlait Milk, which decreased by 4.48%, along with Investore Property and Sky Network Television, both down by 2.8%.

In currency markets, the dollar was last up 0.39% on the yen to trade at JPY 157.65, while it gained 0.32% against the Aussie to AUD 1.5117, and advanced 0.52% on the Kiwi, changing hands at NZD 1.6296.

On the oil front, Brent crude futures were last down 0.64% on ICE at $82.22 per barrel, and the NYMEX quote for West Texas Intermediate fell 0.8% to $77.99.

Bank of Japan holds rates, steps towards unwinding stimulus

In economic news, the Bank of Japan announced that it would maintain its lending rates, while also revealing plans to reduce its substantial bond purchases.

Detailed plans for the tapering were expected to be unveiled in July, marking a step towards unwinding its significant monetary stimulus, which includes a nearly $5trn balance sheet.

Despite the move, the BoJ said it would continue its government bond purchases at a pace of around JPY 6trn (£30m) per month.

The BoJ's board unanimously decided to keep the short-term policy rate target between 0% and 0.1%, citing a moderate economic recovery with steady consumption.

Governor Kazuo Ueda stressed the importance of flexibility and market stability in the bond reduction plan.

The market reacted cautiously to the BoJ's decision, leading to a decline in both the yen and Japanese bond yields.

“The yen is weaker today understandably given the BoJ has once again failed to meet market - and our - expectations that had moved to expecting the commencement of a slower pace of purchases of JGBs from the current pace of close to JPY 6trn,” said MUFG head of research Derek Halpenny.

“There was one dissenter - Toyoaki Nakamura; this is not hugely surprising and his dissent wasn’t outright.

“He supports the slowing of JGB purchases but felt the steps to decide and agree a framework should only happen after assessing developments in economic activity and prices revealed in the July 2024 Outlook Report.”

Japan's industrial production index meanwhile saw a monthly decline of 0.9% in April, landing at 100.8, according to the Ministry of Economy, Trade and Industry's revised report.

On an annual basis, the index fell by 1.8%.

The shipments index also decreased by 0.4% month-on-month and 1.4% year-on-year, reaching 98.6.

Inventories dropped to 102.4, down by 0.2% from March and 2.4% compared to April 2023.

The inventory ratio stood at 106.4, experiencing a 0.7% monthly decline but a 0.5% increase on an annual basis.

Reporting by Josh White for Sharecast.com.