Japanese shares rise to 34-year highs

Sydney — Japanese shares surged to new 34-year highs and the yen lost ground on Tuesday as the Bank of Japan (BoJ) stood pat on ultra-loose monetary policy, while Chinese stocks got a temporary lift from a report of a huge market rescue package.

Japan’s Nikkei rose 1% to the highest level since February 1990, bringing year-to-date gains to 10.3%. The MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.5%, driven by a 1.8% jump in Hong Kong's Hang Seng index

Bloomberg reported that Chinese authorities are seeking to mobilise about 2-trillion yuan ($278bn) to stabilise the country’s slumping stock markets. Chinese blue chips briefly popped higher on the news but were last down 0.5%, nearing five-year lows.

The BoJ on Tuesday kept ultra-low interest rates intact in a widely expected move, as it awaits more data on whether wage growth will accelerate enough to keep inflation sustainably around its 2% target.

None of the economists polled by Reuters expect the central bank to end its negative rate policy this time, though many see it happening in April. Governor Kazuo Ueda will hold a press conference after the decision.

The yen lost 0.2% to ¥148.35 to the dollar, having slid 5% so far in 2024.

“The market will probably be disappointed again because we don't believe that Ueda will give a clear signal of policy normalisation in the near future,” said Robert Carnell, regional head of research, Asia-Pacific, at ING.

“He may, however, sound more dovish than in the past, given the recent slowdown in inflation.”

Yields on Japanese government bonds eased one basis point to 0.64%, way down from a peak of 0.97% in November.

Most Asian share markets were up, tracking the overnight rally on Wall Street which sent the benchmark S&P 500 to another record high amid little market-moving data and events.

Investors are waiting for earnings from Netflix after the close and expectations are generally upbeat. Also due is GE, with JPMorgan looking for earnings to beat the Street's forecasts.

Traders have pared back the timing of the first interest rate cut from the Federal Reserve, with the probability for March just at 40% now. However, they still see about five rate cuts this year.

The European Central Bank (ECB) meets on Thursday and is expected to hold monetary policy steady.

Currency markets were broadly steady ahead of the BoJ decision. The dollar has held up better this year, up 2% against its major peers, but its recent movements have been rangebound and it was holding at 103.31.

US treasury yields were steady after dipping overnight as investors took advantage of a decline in bond prices to enter the market. The 10-year bonds were little changed at 4.1014%, while the two-year yield held at 4.3910%.

Oil prices slipped a little on Tuesday after surging 2% overnight as a Ukrainian drone strike on Russia’s Novatek fuel terminal caused supply disruptions.

US crude futures were 0.2% lower at $74.61 a barrel after climbing 2.4% overnight to a one-month top of $75.75 and Brent futures slipped 0.2% to $79.94.

Spot gold was 0.1% higher at $2,022.89/oz.

Reuters