Asia report: Most markets fall as inflation accelerates in Japan

Asia-Pacific markets mostly fell on Friday after Japan's core inflation rate for May came in cooler than expected at 2.5%, below forecasts, putting pressure on the country’s plans to raise interest rates.

Headline inflation in Japan rose to 2.8%, up from April’s 2.5%.

“Asian stocks declined after technology equities dragged the S&P 500 lower overnight,” said TickMill market analyst Patrick Munnelly.

“The yen was the focus of attention after a six-day decline that increased the likelihood of intervention.

“The Hang Seng Index dropped as much as 2%; mainland indexes also declined amidst Beijing's hesitancy to increase stimulus.”

Munnelly said the government's decision to raise levies related to renewable energy resulted in an acceleration of inflation in Japan, supporting the Bank of Japan’s argument to consider hiking interest rates in the coming months.

“At their meeting a week ago, policymakers kept interest rates unaltered and refused to provide specifics on reducing bond purchases.”

Most markets end the week in negative territory

In Japan, the Nikkei 225 edged down by 0.1% to 38,596.47, while the Topix index saw a marginal decrease of 0.03% to 2,724.69.

Notable decliners included Furukawa Electric, SoftBank Group, and Aozora Bank, which fell by 3.19%, 3.14%, and 2.61%, respectively.

Mainland Chinese markets also experienced declines, with the Shanghai Composite falling by 0.24% to 2,998.14 and the Shenzhen Component slipping by 0.04% to 9,064.84.

Major losses in Shanghai were seen in China Grand Automotive Services, Anhui Shanying Paper Industry, and Jilin Yatai Group, each plunging over 10%.

Hong Kong's Hang Seng Index dropped 1.67% to 18,028.52, driven down by significant losses in Xinyi Solar, down 5.63%, Hang Lung Property, off 4.74%, and Hang Seng Bank, which lost 4.47%.

South Korea's Kospi index declined by 0.83% to 2,784.26, with substantial drops in SK Innovation of 5.7%, as Hanwha Aerospace lost 4.84% and Kumho PetroChemical was down 4.79%.

Conversely, Australia's S&P/ASX 200 was an outlier, rising by 0.34% to 7,796.00, supported by gains of 4.42% in Genesis Minerals, 4.36% for Alumina, and 4.19% in Evolution Mining.

New Zealand's S&P/NZX 50 fell by 0.76% to 11,682.39, weighed down by declines in Pacific Edge, which finished 5.38% lower, Infratil, down 4.83%, and A2 Milk Company, off 3.47%.

In currency markets, the dollar was last 0.01% weaker on the yen, trading at JPY 158.91, while it strengthened 0.05% against the Aussie to AUD 1.5033, and edged down 0.12% on the Kiwi, changing hands at NZD 1.6321.

Oil prices were mixed, with Brent crude futures last down 0.05% on ICE at $85.67 per barrel, while the NYMEX quote for West Texas Intermediate increased 0.01% to $81.30.

Japan’s headline inflation accelerates in May

In economic news, Japan's core inflation rate for May came in at 2.5%, slightly below the 2.6% forecasted by economists in a Reuters poll.

It represented an increase from April’s core inflation rate of 2.2%, while the headline inflation rate rose to 2.8% in May, up from 2.5% in April.

The ‘core-core’ inflation rate, which excludes both fresh food and energy prices, was recorded at 2.1%, down from 2.4% in April.

Reporting by Josh White for Sharecast.com.