Asia report: Markets mixed as Japan inflation slows

Asia-Pacific markets showed a mixed performance on Friday, as investors digested the minutes of the last Bank of Japan meeting.

Japan's inflation was also in focus, as the country’s headline inflation rate dropped to its lowest level since July 2022.

“Overnight, Japan’s inflation rate dropped to 2.8% in November, the lowest level since July 2022, helping the Nikkei to buck broader negativity across markets in Asia,” said Interactive Investor head of investment Victoria Scholar.

“On the final day of trade before Christmas, all eyes are on the latest US inflation figures due at lunchtime.

“US futures are pointing to a lower open after the S&P 500 and the Nasdaq closed higher by over 1% on Thursday.”

Markets mixed, Japan equities manage gains

In Japan, the Nikkei 225 rose slightly by 0.09% to reach 33,169.05 points, while the Topix index gained 0.45%, closing at 2,336.43.

The gains in Tokyo were led by Shiseido, up by 4.32%, Kawasaki Kisen Kaisha, ahead 4.22%, and Mitsui Engineering & Shipbuilding, which was ahead 3.91%.

Conversely, China experienced declines, with the Shanghai Composite down 0.13% at 2,914.78, and the Shenzhen Component off 0.39% to 9,221.31.

Among the big decliners in Shanghai were Cashway Technology, down by 10.05%, and Chinese Universe Publishing And Media, down by 10.01%.

Hong Kong's Hang Seng Index faced a significant drop of 1.69%, closing at 16,340.41 points.

This decline was led by losses for NetEase, which fell by 24.6%, Tencent Holdings, down by 12.35%, and Shenzhou International Group, which decreased by 7.69%.

In South Korea, the Kospi index was relatively stable, showing a marginal decline of 0.02% to 2,599.51 points.

Notable losses in Seoul included Krafton, which fell by 13.77%, and Netmarble Games, down by 5.56%.

Australia's S&P/ASX 200 index recorded a minimal drop of 0.03%, closing at 7,501.60 points, led lower by Mercury NZ, which decreased by 3.78%, and Telix Pharmaceuticals, down by 2.86%.

In contrast, New Zealand's S&P/NZX 50 index showed a modest gain of 0.06%, reaching 11,634.43 points.

Wellington’s gains were led by Scales Corporation, up by 6.47%, and Arvida Group, which increased by 2.97%.

In currency markets, the dollar was unchanged against the yen, trading at JPY 142.12.

The greenback was mixed against its downunder counterparts, last strengthening 0.01% on the Aussie to AUD 1.4702, while it weakened 0.01% against the Kiwi to change hands at NZD 1.5885.

On the oil front, Brent crude futures were last up 0.77% on ICE at $80.00 per barrel, while the NYMEX quote for West Texas Intermediate increased 0.97% to $74.61.

Japan inflation slows in November

In economic news, Japan's headline inflation rate for November registered at 2.8%, marking its lowest point since July 2022 and down from the prior month's figure of 3.3%.

Similarly, core inflation for November, which excludes fresh food prices, slowed to 2.5% from 2.9%, aligning with expectations set by economists polled by Reuters.

Additionally, the ‘core-core’ inflation rate, which excludes both fresh food and energy prices, came in at 3.8%, down from October's 4%.

“In a nutshell, consumer inflation is now on a cooling trend again after the energy-price induced blip in October,” said Kelvin Lam at Pantheon Macroeconomics.

“The lagged effect of higher import costs earlier is finally fading, and we expect core prices to cool further from here.

“The timing of the BoJ reversing its loose monetary policies depends crucially on whether they think price increases are on a sustainable path or not.”

Lam noted that real wages were still deep in negative territory, while nominal wages were consistently revised down from first releases in recent months.

“That said, the fall in cost-push inflation should give Japanese households some breathing space.

“All eyes will be on the ‘Shunto’ wage round in spring.”

Elsewhere, the Bank of Japan’s minutes from its October meeting revealed discussions regarding how to communicate a shift in the central bank's yield curve control (YCC) policy.

During the meeting, the BoJ adjusted its policy, specifying that the target level of the 10-year Japanese government bond yield would be maintained at 0%.

However, it was also stated that the upper limit of 1% would be taken “as a reference” rather than a strict cap.

Some board members believed it was essential to emphasise the Bank’s commitment to continuing monetary easing with YCC.

Additionally, it was proposed that the bank should clarify that the measures were not preparations for discontinuing YCC and the negative interest rate policy.

Reporting by Josh White for Sharecast.com.