Asian Stock Market Are Mixed Amid AI Hype On Wall Street; Yen Drops Ahead Of Bank Of Japan Decision On Monetary Policy

In today’s trading session, Asian markets and the Japanese Yen weakened against the dollar ahead of the Bank of Japan’s policy decision. 

Regional investors are trading cautiously, despite a series of record highs on Wall Street driven by encouraging inflation data and a Federal Reserve forecast indicating potential rate cuts this year. 

All eyes are now on Tokyo, where the Bank of Japan is expected to take a new step away from its ultra-loose monetary policy by gradually reducing its substantial government bond holdings. 

The BoJ has been deliberating its next move to normalize monetary policy after years of maintaining exceptionally low borrowing costs, most notably by raising interest rates cut of negative territory in March — the first increase in 17 years. 

While officials are not expected to raise rates on Friday, the reduction of bond holdings known as quantitative tightening, is anticipated as the next measure, with the yen’s weakness also influencing discussions.

The Japanese Yen is hovering just above the 34-year low against the dollar reached in April following the BoJ meeting that prompted authorities to intervene in the forex markets for support. 

Shunuke Kobayashi, chief economist at Mizuho Securities, told AFP that reducing bond holdings would help the BoJ manage its debt ahead of future rate hikes. 

Japan’s benchmark Nikkei 225 rose after the BoJ maintained its monetary policy, closing at 0.2% higher at 38,814.56. However, the central bank announced plans to reduce government bond purchases as it gradually exits its ultra-loose stance. 

Meanwhile, the Hang Seng index declined by 0.9% to 17,941.78, while the Shanghai Composite increased by 0.1% to 3,032.63. South Korea’s Kospi inched up 0.1% to 2,758.42.

In Australia, the S&P/ASX 200 dropped 0.3% to 7,724.30.