BANGKOK (AP) – Shares were mixed in Asia yesterday after the Bank of Japan (BOJ) hiked its benchmark interest rate for the first time in 17 years, ending a longstanding negative rate policy at odds with the stances of most central banks.
In a widely anticipated move, the BOJ raised its overnight call rate to a range of 0 to 0.1 per cent, up from minus 0.1 per cent.
It said that wage increases and other indicators suggested that inflation had stabilised above the BOJ’s two-per-cent target, but noted “extremely high uncertainties,” including weakness in industrial production, exports, housing investment and government spending.
Market reaction was muted.
Tokyo’s Nikkei 225 index rose 0.7 per cent to 40,003.60, while the dollar rose to JPY150.35 from JPY149.14.
Chinese markets declined. Hong Kong’s Hang Seng index lost 1.2 per cent to 16,526.98, while the Shanghai Composite index dropped 0.7 per cent to 3,064.56.
In Seoul, the Kospi fell 1.1 per cent to 2,656.17.
Australia’s S&P/ASX 200 added 0.4 per cent to 7,703.20 after Australia’s central bank kept its benchmark interest rate steady at 4.35 per cent for a third consecutive meeting. The widely expected decision reflected the fact that inflation is cooling but still above the Reserve Bank of Australia’s target.
On Monday, United States stocks rose ahead of a busy week for central banks around the world.
This week’s highlight for Wall Street will likely be the Federal Reserve’s (Fed) meeting on interest rates, which ends today. The widespread expectation is for the central bank to hold its main interest rate steady at its highest level since 2001.
But Fed officials will also give updated forecasts for where they see interest rates heading this year and in the long run. They earlier had pencilled in three cuts to rates this year, which would relieve pressure on the economy and financial system.
Recent reports on inflation have consistently been coming in worse than expected, though. That could force the Fed to trim how many rate cuts it foresees delivering this year.
Such a move would be a sore disappointment for investors.
Across the Atlantic, the Bank of England will announce its latest decision on interest rates later in the week.
The S&P 500 added 0.6 per cent on Monday to 5,149.42, coming off its first back-to-back weekly losses since October.
The Dow Jones Industrial Average rose 0.2 per cent to 38,790.43, and the Nasdaq composite gained 0.8 per cent to 16,103.45.
