- Asia-Pacific equities trace Wall Street’s losses as BOJ surprises markets.
- BOJ defends current monetary policy, alters YCC curve limits to entertain momentum traders.
- RBA Minutes, PBOC inaction gain less attention but keep policy hawks hopeful.
- Headlines surrounding China offer mixed signals but risk appetite remains weak amid recession fears.
Equities in the Asia-Pacific region copy Wall Street’s move, despite an upbeat start, as the Bank of Japan (BOJ) inflicted losses in the stocks and bond markets with its unexpected move during early Thursday. On the same line could be the Reserve Bank of Australia’s (RBA) readiness for further rate hikes, per the RBA Meeting Minutes, as well as the World Bank’s degrading of China’s growth forecasts.
Amid these plays, the MSCI’s index of the Asia-Pacific shares ex-Japan prints a four-day downtrend while Japan’s Nikkei 225 slumps 2.71% by the press time.
BOJ held its benchmark rate unchanged at -0.10% while keeping the short-term interest rate target at -0.1% while directing 10-year Japanese Government Bond (JGB) yields toward zero. In doing so, the Japanese central bank matched the market expectations. The surprise factor, however, was the BOJ’s alteration of the Yield Curve Control (YCC) and the bond issuance announcements. “The BOJ will expand the range of 10-year Japan government bond yield fluctuations from its current plus and minus 0.25 percentage points to plus and minus 0.5 percentage points,” reported Reuters.
Elsewhere, RBA Minutes suggested that Australia’s central bank considered leaving interest rates unchanged at its December policy meeting, citing the lagged effects of the aggressive tightening delivered so far and the benefits of moving cautiously in an uncertain environment. The same failed to impress Australia’s ASX 200 and joined the broad risk-off mood to print 1.50% intraday loss at the latest.
On the other hand, Chinese markets remained dismal even as the People’s Bank of China (PBOC) kept the benchmark Loan Prime Rates (LPR) unchanged. The reason could be linked to the World Bank’s downbeat forecasts for the dragon nation, as well as the cautious mood ahead of a diplomatic meeting between Australia and China.
As BOJ was considered the last bear among the major central banks, the recent hawkish signals amplify the global recession woes and underpin the run-up in the key Treasury bond yields, which in turn weigh on the equities. However, the US Dollar struggles to cheer the same amid the Japanese Yen’s (JPY) haven status and recently downbeat concerns surrounding the US. It should be noted that prices of Oil dropped but those of Gold recover as of late.
Moving on, a speech from BOJ Governor Haruhiko Kuroda will precede the second-tier data from Germany and the US to entertain traders.