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Nikkei slips further as Asian stocks reel from BOJ policy shift

Published 12/21/2022, 02:20 PM
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By Ambar Warrick

Investing.com -- Most Asian stock markets fell further on Wednesday as investors gauged the implications of a surprise policy shift by the Bank of Japan, with the Nikkei index extending its losses to an over two-month low.

The Nikkei 225 was the worst performer in Asia for a second consecutive session, losing 0.7% after a 2.5% tumble in the prior session. The BOJ widened the range within which the yields on the benchmark government bonds are allowed to fluctuate, heralding a potential pivot away from the central bank’s ultra-dovish policy.

Such a scenario would bode poorly for Japanese stock markets, which have enjoyed an accommodative environment for nearly a decade.

The prospect of a hawkish pivot by the BOJ also rattled Asian markets, which were already reeling from a series of hawkish signals from other major central banks. The Federal Reserve, European Central Bank, and the Bank of England all signaled last week that interest rates will keep rising in 2023.

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell 0.1% and 0.3%, respectively, amid continued uncertainty over rising COVID-19 cases in the country. While analysts expect the recent relaxing of anti-COVID curbs to eventually spur an economic recovery, they warned of near-term volatility in Chinese markets as the country grapples with increasing infections.

Uncertainty over China, coupled with fears that hawkish central banks could trigger a recession in 2023, has largely dented expectations for an end-year rally in Asian stocks. Regional markets were battered by rising interest rates this year, with most bourses trading lower for 2022.

India’s Nifty 50 and BSE Sensex 30 indexes fell about 0.1% each. But are among the few Asian bourses trading higher for the year, up over 6% each on strength in the Indian economy. The country is pipped as one of the fastest-growing economies in 2022, with a projected GDP of nearly 7%.

Some Asian bourses recovered from sharp losses on Wednesday. The Taiwan Weighted index added 0.5%, while Philippine stocks led gains across Southeast Asia with a 0.7% jump.

Australia’s ASX 200 index surged 1.3% after sinking to an over-one-month low in the prior session.

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