Asia report: Stocks rise as Japan's inflation reaches 41-year high

Stock markets were in the green in Asia on Friday, as investors digested inflation data out of Japan showing prices rising at their fastest clip in more than four decades.

In Japan, the Nikkei 225 was up 0.56% at 26,553.53, as the yen weakened 0.95% against the dollar to last trade at JPY 129.65.

Automation specialist Fanuc was up 0.3%, fashion firm Fast Retailing added 0.94%, and technology conglomerate SoftBank Group managed gains of 0.12%.

The broader Topix index was ahead 0.59% by the end of trading in Tokyo, settling at 1,962.87.

Fresh data out of the country showed core inflation in Japan rising 4% year-on-year in December - in line with expectations, and making for the most rapid rise in prices since December 1981.

It was a decent rise from the 3.7% core inflation print in November as well.

The month-on-month reading, meanwhile, came in at 0.2%, which was flat on the prior month.

“The lagged effect of yen weakness, coupled with higher imported raw material and energy costs compared with a year earlier, is likely to mean that consumer inflation will remain elevated and fall only gradually this year,” said Duncan Wrigley at Pantheon Macroeconomics.

“Inflationary pressure from higher import costs is starting to ease, owing to the weaker US dollar.”

Wrigley noted that the yen-based import price index rose 22.8% y/y in December, down from 28.0% in November.

“This should over time help to reduce cost pressures across the economy, which Bank of Japan governor [Haruhiko] Kuroda views as still coming out of its pandemic phase.”

On the mainland, the Shanghai Composite was 0.76% stronger at 3,264.53, and the technology-heavy Shenzhen Component was 0.56% firmer at 11,980.62.

The People’s Bank of China sated market expectations in its latest policy decision earlier in the day, leaving both the one-year and five-year loan prime rates unchanged.

It held the one-year rate at 3,65% and the five-year rate at 4.3% - both levels which have been retained since August last year.

Duncan Wrigley at Pantheon said the PBoC was likely to cut both rates by 10 basis points after Chinese New Year, as the economy entered a reopening phase in March or April, with the intention to bolster private credit demand.

“Monetary policy loosening probably will supplement presumptive new premier Li Qiang’s government work report at the National People’s Congress in March that will place domestic demand expansion at the top of the economic policy agenda for this year.”

South Korea’s Kospi advanced 0.63% to 2,395.26, while the Hang Seng Index in Hong Kong jumped 1.82% to 22,044.65.

The blue-chip technology stocks were on the front foot in Seoul, with Samsung Electronics up 0.49% and SK Hynix leaping 2.46%.

Oil prices were both in the green as the region entered the weekend, with Brent crude futures last up 0.14% on ICE at $86.28 per barrel, and the NYMEX quote for West Texas Intermediate advancing 0.21% to $80.50.

In Australia, the S&P/ASX 200 was up 0.23% at 7,452.20, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was 0.77% higher at 11,977.48.

The down under dollars were both stronger on the greenback, with the Aussie last ahead 0.289% at AUD 1.4431, and the Kiwi advancing 0.29% to NZD 1.5591.

Reporting by Josh White for Sharecast.com.