Asian Investors Trade Cautiously Ahead of Key Central Bank Decisions

In today’s trading, Asian shares mostly declined in cautious trading ahead of central bank meetings around the world.

This week, the Federal Reserve, the Bank of England, and the Bank of Japan are all holding monetary policy meetings. 

The Federal Reserve’s meeting concludes just hours after the Bank of Japan’s highly anticipated decision, sparking speculation about whether the BoJ will raise rates again, following its first increase in 17 years back in March. 

BoJ chief Kazu Ueda has remained tight-lipped about the upcoming decision but is expected to outline a plan for winding down the bank’s bond-buying program, which has kept borrowing costs exceptionally low for years.

However, Katsutoshi Inadome, senior strategist at SuMi TRUST, believes an interest rate hike is unlikely at this time. 

He warned in a commentary that a rate hike this month, combined with detailed plans to scale back Japanese Government Bond (JGB) purchases, would excessively disrupt the market and cause yen appreciation, which would hurt domestic equities.

A rate hike is only wise if the yen weakens significantly. JGB purchase reductions will occur in stages, considering economic and market impacts. No clear outlook on rate hikes is expected, but an increase is anticipated in October. Speculation on Fed and BoJ cuts has recently strengthened the yen. 

Meanwhile, Japan’s Nikkei 225 rebounded from earlier losses, rising by 0.2% and closing at 38,525.95.  

The Hang Seng Index slipped 1.3% to 17,014.17 while the Shanghai Composite Index declined 0.4% to 2,879.30.

South Korea’s Kospi also went down by 1% closing at 2,738.19.