Asia report: Most markets drop as BoJ stands pat

Markets in Asia were defined by Japan on Thursday, with the yen strengthening sharply and the Nikkei in a serious slide after the Bank of Japan stood pat on monetary policy.

The Nikkei 225 sold off, closing down 3.05% at 15,434.14.

Investors clambered for the safe haven of the yen, which strengthened sharply during the day - it was last trading 1.62% stronger at JPY 104.29 per USD.

The stronger yen came despite attempts by the government to warn off investors, with Tokyo telling the market before the BoJ decision that the currency’s movements were being carefully monitored, with the appreciation described as rapid and speculative.

In its policy statement, the central bank said risks to the country’s outlook included ongoing uncertainties in emerging and commodity-exporting markets, with China named, as well as the impact of the US monetary policy response to global financial markets, Europe’s debt problem and geopolitical risks.

“The BoJ decided a status quo at the June meeting to avoid criticism for a collusive relationship with the government facing the July Upper House election and to save its scarce ammunition before the UK referendum next week,” said Kohei Iwahara of Natixis Japan Securities.

“The yen is already stronger than most companies feel comfortable at and a dovish Fed could strengthen the yen further, which increases the BoJ's difficulties to achieve its inflation target.”

Elsewhere, the Shanghai Composite Index was down 0.48% at 2,873.47, while the Shenzhen Composite lost 0.23% at 1,885.43.

These drops followed Wednesday’s gains, when Chinese markets shrugged off MSCI’s decision to keep mainland-listed shares out of its emerging markets index.

Before markets opened, the People’s Bank fixed renminbi at CNY 6.5739 per USD - the onshore yuan can trade 2% above or below the loose peg.

In South Korea, the Kospi tell 0.86% to 1,951.99, while in Hong Kong the Hang Seng Index closed down 2.1% at 20,038.42.

Standard & Poor’s sent Noble Group stock deeper into junk status on Wednesday, after the ratings agency cut the commodities traders long-term corporate credit rating to B+ from BB-.

“We downgraded Noble to reflect our view that the company's liquidity position has weakened despite the recent completion of refinancing and a proposed US$500 million fully underwritten rights issue,” said S&P Global Ratings credit analyst Danny Huang.

In addition to the BoJ decision, the Federal Open Market Committee held its interest rate target at 0.25%-0.5% late on Wednesday after a two-day policy meeting.

In its statement, the Fed pointed to the decline in unemployment to 4.7%, but said job gains had diminished.

Chair Janet Yellen said that the Brexit vote on 23 June was another factor in the committee’s decision.

The central bank’s dot plot still pointed to a greater likelihood of two rate hikes this year, but doubts about this happening are increasing in the market.

“The level of confidence in that central case view is now less, with six members anticipating only one hike this year," said ANZ's Brian Martin.

Oil prices fell for the fifth straight Asian trading session, with global uncertainties putting the kibosh on price stability - particularly the prospect of Brexit.

Brent crude was last down 1.47% at $48.26 per barrel, and West Texas Intermediate lost 1.37% at $47.36.

Down under, the S&P/ASX 200 gave up earlier gains to close down 0.02% at 5,145.98.

Shares in Crown Resorts surged 13.23% in Sydney, after the company announced plans to demerge its Australian and international properties.

In New Zealand, the S&P/NZX 50 bucked the regional trend by closing up 0.3% to 6,888.56 in relatively quiet trading.

The Kiwi charged ahead against the greenback, and was last 0.26% stronger at NZD 1.4181, while the Aussie slinked back 0.5% to AUD 1.3568.