Insight into Divergence with Other Major Central Banks
The Bank of Japan’s policy decision, as well as Governor Kazuo Ueda’s subsequent remarks, will take center stage in Asian markets on Tuesday. Investors are keen to gain insight into the potential divergence between the BOJ and other major central banks in the coming year. While central banks in the United States, Europe, and England are believed to be concluding their hiking cycles and shifting towards interest rate cuts, the BOJ is just beginning to emerge from a prolonged period of negative rates and ultra-loose policies. Although a rate hike is not expected on Tuesday, it could happen sooner than anticipated, as the BOJ has surprised markets before with adjustments to its ‘yield curve control’ policy and intervention in the foreign exchange market by purchasing yen. The recent weakening of the yen, the decline of the Nikkei 225 stock index, and the rise of 10-year Japanese Government Bonds have attracted attention, indicating a possible shift by the BOJ.
Reserve Bank of Australia’s Policy Meeting Minutes Published
In addition to the BOJ’s policy decision, the Reserve Bank of Australia will release the minutes of its latest policy meeting. The RBA held rates at a 12-year high of 4.35% during that meeting.
Asian Stocks Experience Decline after Recent Surge
While Asian stocks experienced a 0.5% decline on Monday, the largest drop in two weeks, it is not surprising given the 3% surge last week following the Federal Reserve’s indication that U.S. rate hikes have concluded. With the focus now shifting to when the easing cycle will begin, market direction may become clearer in the coming days.
Corporate News: Nippon Steel to Acquire U.S. Steel
Japan’s Nippon Steel recently secured a deal to purchase U.S. Steel for $14.9 billion in cash. This move reflects a belief that U.S. Steel will benefit from the government spending and tax incentives outlined in President Joe Biden’s infrastructure bill. Nippon Steel’s shares, having experienced a 15% decline from their recent peak, have rallied approximately 50% over the past year.
- Bank of Japan policy decision
- Reserve Bank of Australia minutes
- New Zealand trade data for November
(Editing by Josie Kao)