Friday saw advances in the majority of Asian markets, following Wall Street's overnight gains as investors celebrated the Federal Reserve's massive interest rate decrease.
Although the Bank of Japan maintained interest rates unchanged and stated it anticipated inflation to continue rising, Japanese equities outperformed their regional counterparts. However, they lost some of their early gains.
Despite growing requests for greater stimulus, the People's Bank of China maintained its benchmark lending rate, which caused Chinese markets to fall.
Wall Street, where the S&P 500 and Dow Jones reached all-time highs following the Fed's 50 basis point rate decrease and the start of an easing cycle, provided a strong lead-in for regional markets.
This move was mostly driven by gains in technology companies, with purchasing flowing into Asian markets. However, in Asian trade, U.S. stock index futures declined as there were indications that the rate-cut euphoria was now cooling.
For the second straight day, the Nikkei 225 in Japan led the Asian market in terms of performance, rising 1.8%, while the TOPIX as a whole gained 1.5%. Following the BOJ ruling, both indices lost some of their early gains.
In accordance with market expectations, the BOJ unanimously decided to maintain the current interest rate levels. Although the central bank did not make any overtly hawkish statements, it did raise concerns about forecasts for inflation measured by the consumer price index to rise steadily.
The BOJ has raised interest rates twice this year, primarily due to expectations of rising inflation. The central bank anticipates higher inflation as private spending improves.
The BOJ's position was reinforced by data that was published on Friday and indicated that CPI inflation reached a 10-month high in August.
However, the inflation figure also showed that the Japanese economy was steadily improving, particularly since early this year's large salary increases helped to boost private spending.
The recovery from seven-month lows fizzled out, as China's CSI 300 and Shanghai Composite indexes declined marginally on Friday, trailing their regional counterparts.
Even as requests for further stimulus measures from Beijing increased, the People's Bank of China continued to maintain its benchmark loan prime rate, significantly undermining sentiment towards Beijing.
In July, the PBOC abruptly reduced the LPR, bringing it even closer to record low levels in an effort to ease local financial constraints. However, a number of recent economic indicators pointed to little progress in China, with low consumer expenditure and persistent deflation still in effect.
(Sources: investing.com, reuters.com)
