The Bank of Japan (BOJ) meets Tuesday amid speculations that it is considering how and when to move away from negative interest rates

Asia stocks got off to a cautious start on Monday in a week where Japan’s central bank might edge further away from its policies, while a key data on U.S. inflation is expected to underpin market pricing of interest rate cuts there.

The Bank of Japan (BOJ) meets Tuesday amid speculations that it is considering how and when to move away from negative interest rates.

April was favoured by 17 of 28 economists as the kick-off for negative rates to be scrapped, making the Bank of Japan one of the few central banks in the world actually tightening.

Since the last meeting in October, 10-year JGB yields have dropped and the yen has gained, giving the BOJ little incentive to revise policy at this stage, said Barclays economist Christian Keller.

We think the Bank of Japan will wait to confirm the result of the ‘shunto’ wage negotiations next spring, before moving in April, Keller said.

Japan’s Nikkei shed 0.8 per cent in early trade, weighed in part by a strong yen. MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.2 per cent.

South Korea’s main index was flat.

S&P 500 futures edged up 0.1 per cent, while Nasdaq futures were flat.

Over in the US, a reading on core PCE index is forecast by analysts to gain 0.2 per cent in November with the annual inflation rate slowing to its lowest since mid-2021 at 3.4 per cent.

Analysts suspect the balance of risk is on the downside and an increase of 0.1 per cent for the month would see the six-month annualised pace of inflation slow to just 2.1 per cent and almost at the Fed’s target of 2 per cent.

Markets reckon the slowdown in inflation means the Federal Reserve will have to ease policy just to stop real rates from increasing, and are wagering on early and aggressive action.