While Hong Kong's explosive surge took a break on Thursday, Asian markets fell from a 32-month high, while Japan's Nikkei gained as the likelihood of more monetary policy tightening this year lessened.

Several Asian markets including South Korea, Taiwan, and mainland China are closed for the day. The main driver of the 1% down in MSCI's broadest index of Asia-Pacific equities outside of Japan was the 1.6% decline in Hong Kong's Hang Seng index.

This followed a sharp increase of almost 30% in only three weeks, driven by a rush of stimulus measures from China aimed at reviving a flagging economy.

Following a meeting with Central Bank Governor Kazuo Ueda, Japan's newly elected Prime Minister Shigeru Ishiba stated that the nation was not prepared for more rate rises. The Nikkei outperformed, rising by 2%.

Ueda said that while determining whether to raise interest rates, the central bank will proceed cautiously.

Asahi Noguchi, a dovish BOJ policymaker, stated on Thursday that the bank must gradually maintain loose monetary conditions in response to it.

The yen fell 2% overnight and then fell to a one-month low.

The BOJ's potential rate rise of 10 basis points by December is less than 50% implied by futures, and rates are only expected to increase from the current 0.25% to 0.5% by the end of the next year.

Wall Street remained largely steady overnight, but Treasury rates increased as further evidence of a robust US employment market came from a solid private payrolls report. This reduced the likelihood of a significant negative surprise in Friday's non-farm payrolls data.

This week, safe-haven flows bolstered bonds as Middle East geopolitical concerns escalated. As its forces advanced into its northern neighbour in a campaign against the Hezbollah armed group, Israel claimed that eight of its soldiers had been killed in fighting in south Lebanon.

(Sources: investing.com, reuters.com)