HONG KONG- Japanese shares led gains in Asian stocks on Tuesday as the Bank of Japan defended its ultra-easy stance, while oil slid on fears of lower demand from China as Shanghai applied a “zero-COVID” strategy by locking down despite a relatively modest caseload.
Japan’s Nikkei gained 0.91 percent in early trade, while MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.64 percent.
The BOJ vowed to keep monetary policy ultra-loose, offering to buy unlimited government bonds for the first four days of this week, to prevent yields in Japan from rising as they are doing elsewhere following US Federal Reserve’s moves to hike interest rates in the face of mounting inflationary pressures.
Japan’s 10-year government bond yields hovered near the 0.25 percent upper limit of the Bank of Japan’s yield target even after the central bank made a rare move to step into the market for a second day.
Trading remained choppy however. Investors will favor markets that are lagging behind the Fed’s rate hike, trading on “a day to day trading mentality” and market noises and short term development , Chi Lo, senior market strategist APAC at BNP Paribas Asset Management said .
“There is not really even medium term direction that the market is following,” he added.
The BOJ’s action left the yen fighting for footing on Tuesday, following its worst session in 16 months.
The Japanese currency weakened by as much as 2.4 percent to 125.10 to the dollar overnight, its lowest since August 2015, before recovering to 124.24 in volatile morning trade in Tokyo.
Meanwhile, oil further weakened on Tuesday as market expects China to suffer from a slowed economy while it fights against renewed outbreak of coronavirus.
