The MSCI’s broadest index of Asia-Pacific shares excluding Japan rose by 0.20%, nearing the seven-month peak it reached on Friday
Asian equities inched up on Tuesday in anticipation of the upcoming U.S. inflation report, while Japanese stocks experienced a decline and the yen strengthened amid growing expectations that the Bank of Japan might be considering exiting its ultra-easy monetary policy as soon as next week.
Gold remained close to its recent all-time high reached last week, while the dollar remained relatively stable as investors awaited the U.S. consumer price index (CPI) report later in the day to determine when the Fed might begin its rate cut cycle.
The MSCI’s broadest index of Asia-Pacific shares excluding Japan rose by 0.20%, nearing the seven-month peak it reached on Friday.
Chinese stocks saw an increase, with Hong Kong’s Hang Seng Index climbing by 0.75%, driven by tech stocks, while the blue-chip CSI300 index rose by 0.13%.
Japan’s Nikkei continued its downward trend, falling by 0.84%, as the BOJ refrained from buying Japanese exchange-traded funds  on Monday despite a sharp drop in local shares, fuelling speculations that a shift away from ultra-loose monetary policy is imminent.
A growing number of BOJ policymakers are considering ending negative interest rates this month due to expectations of substantial pay raises in this year’s annual wage negotiations, according to four sources familiar with the central bank’s stance as reported by Reuters last week. The BOJ is scheduled to convene next week.
The shifting expectations have contributed to the yen’s recent strengthening, with the Asian currency trading at 147.26 per dollar.
Bank of Japan Governor Kazuo Ueda stated on Tuesday that the economy is showing signs of moderate recovery, although recent data has revealed some weaknesses, placing pressure on the yen for the day.
Futures currently suggest a 50% probability that the BOJ will adjust rates to zero at its meeting on March 18-19, although some believe it may opt to wait until its April 26 meeting.
The question for investors is whether the BOJ will stop to ending negative rates, or start a tightening cycle. We think the former, Frank Benzimra, head of Asia equity strategy at SocGen told the Reuters Global Markets Forum.
