Asian markets today: Japan’s benchmark Nikkei index climbed above the 70,000 level for the first time on Tuesday, setting a new all-time high after the Bank of Japan (BOJ) announced a widely anticipated interest rate increase and indicated that any further monetary tightening would be implemented gradually.
The Nikkei Stock Average advanced as much as 0.8% in afternoon trading, briefly hitting a record high of 70,000 before paring some gains. The surge followed the Bank of Japan’s decision to raise its benchmark interest rate to 1%, marking its highest level since 1995. The move had been widely anticipated by investors and was largely factored into market expectations.
The Japanese yen remained modestly stronger against the US dollar, while Japanese government bonds weakened following the policy decision.
Meanwhile, the broader Topix index recovered from early-session losses to trade 0.2% higher at 4,007.36.
BoJ’s rate hike
The BOJ on Tuesday raised its benchmark interest rate to a 31-year high, in line with market expectations, as policymakers sought to address inflationary pressures stemming from the ongoing US-Iran conflict in the Middle East.
At the conclusion of its two-day policy meeting, the BOJ voted 7-1 to increase the short-term policy rate by 25 basis points to 1.0% from 0.75%.
“While higher crude oil prices have been exerting downward pressure on economic activity, the economy has generally been supported by factors such as high levels of corporate profits and an improvement in the employment and income situation,” the BoJ said.
Looking ahead, the Bank of Japan indicated that it intends to continue increasing policy interest rates while gradually recalibrating the level of monetary support in the economy.
“However, the price pass-through stemming from the rise in crude oil prices has been progressing at a relatively fast pace in business-to-business transactions, which could spread to an increase in consumer prices across a wide range of items,” the central bank added.
Asian markets today
Asian markets posted modest gains as investors digested the Bank of Japan’s widely anticipated interest rate hike, which lifted rates to their highest level in 31 years. The cautious advance followed a strong rally in the previous session, driven by optimism surrounding a potential peace agreement between the US and Iran.
The MSCI Asia-Pacific index excluding Japan edged up 0.4%.
Meanwhile, South Korea’s Kospi surged 2%, while Hong Kong’s Hang Seng slipped 1.16%, led by weaker-than-forecast Chinese retail sales and fixed-asset investment figures.
In Australia, the Reserve Bank of Australia left its benchmark interest rate unchanged at 4.35%, marking the first pause in rates this year and aligning with market expectations. The decision was unanimously backed by the central bank’s nine-member board.
Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.