Asia report: Markets fall as core inflation reaches 40-year high in Japan
Stocks in the Asia-Pacific region were in the red on Friday, as core inflation in Japan reached its highest level in four decades.
In Japan, the Nikkei 225 was down 1.03% at 26,235.25, as the yen weakened 0.23% against the dollar to last trade at JPY 132.65.
Automation specialist Fanuc managed gains of 0.03%, while fashion firm Fast Retailing lost 0.33% and technology conglomerate SoftBank Group was 0.5% weaker.
The broader Topix index was off 0.54% by the end of trading in Tokyo, settling at 1,897.94.
Fresh data out of Japan showed the core consumer price index rising 3.7% year-on-year in November, making for the quickest price rises since December 1981 in the notoriously inflation-allergic economy.
It was in line with what analysts polled by Reuters had pencilled in, and was a slight uptick on the 3.6% cadence recorded in October.
Overall CPI was 3.8% higher year-on-year in November.
At the same time, the minutes from the Bank of Japan’s October meeting showed policymakers were looking towards a shift in policy as inflation looked set to continue rising.
Members of the BoJ’s policy board acknowledged the central bank’s longstanding dovish approach, but agreed the need to “pay attention to the side effects of monetary easing”.
“It was necessary to examine the impact of high prices on household behaviour and wages humbly,” the minutes read.
The statement said one member highlighted the importance to consider how “future exit strategies” might affect markets, and whether “market participants would be well prepared for them”.
Duncan Wrigley at Pantheon Macroeconomics said the Bank’s expansion of its bond yield control band earlier in the week shocked markets, but the CPI data added credence to its rationale, which was that it was looking to alleviate the side-effects on financial markets.
“We think the additional motivation is that it gives the Bank more room for manoeuvre, by boosting the yen,” Wrigley noted.
“The BoJ expects consumer inflation to cool gradually in 2023, and current energy prices, food prices and currency trends are supportive of this scenario.”
The Bank of Japan saw limited pass-through in terms of sustained wage inflation, Duncan Wrigley explained, although inflationary expectations had started to creep up.
“Overall, given the gloomy outlook in the PMIs and prospects for a moderate recovery in 2023, we think that the BoJ will hold off from raising the base policy rate or monetary tightening intended to cool the economy until 2024.”
On the mainland, the Shanghai Composite slipped 0.28% to 3,045.87, and the technology-heavy Shenzhen Component was 0.25% lower at 10,849.64.
Reports from Bloomberg suggested authorities in Beijing were preparing to ditch quarantine requirements for international travellers from January.
The news outlet, citing unnamed sources “familiar” with the matter, said arrivals to mainland China would only need to undergo three days of ‘health monitoring’, rather than the current five days of government-supervised quarantine in a hotel or isolation facility.
South Korea’s Kospi was 1.83% weaker at 2,313.69, while the Hang Seng Index in Hong Kong was down 0.44% at 19,593.06.
The blue-chip technology stocks were on the back foot in Seoul, with Samsung Electronics down 1.69%, and SK Hynix losing 1.77%.
Oil prices were higher as the region entered the weekend, with Brent crude futures last up 1.86% on ICE at $82.49 per barrel, and the NYMEX quote for West Texas Intermediate rising 2.06% to $79.09.
In Australia, the S&P/ASX 200 was 0.63% lower at 7,107.70, while across the Tasman Sea, New Zealand’s S&P/NZX 50 slipped 0.25% in a short pre-Christmas session, to 11,494.96.
The down under dollars were both stronger on the greenback, with the Aussie last ahead 0.43% at AUD 1.4928, and the Kiwi advancing 0.74% to NZD 1.5887.
Reporting by Josh White for Sharecast.com.