Asia’s stock markets were shaken up by a change in BoJ policy, and the Nikkei fell to its lowest level in two months.
Asian stock markets fell on Tuesday, with the Nikkei taking a big hit. This was because the Bank of Japan changed its ultra-dovish stance in a way that surprised the markets and made it sound less friendly.
After the BoJ widened the range in which yields on benchmark government bonds can change, the Nikkei 225 index fell nearly 3% to a two-month low. The move lends credence to recent rumours that Japan’s high inflation will force the government to reconsider the Bank of Japan’s stance on price pressures.If this happens, the central bank might eventually move away from its ultra-dovish policy.
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Even though the central bank kept its record-low benchmark interest rates and its policy of “quantitative easing,” local stocks were hurt by fears that the policy would change in the future. The Bank of Japan has been very easy on the Japanese markets for almost a decade.
The BoJ’s signals shook Asian markets because they came so soon after hawkish moves by several other major central banks.Last week, the Federal Reserve, the European Central Bank, and the Bank of England all raised interest rates and said they would do it again. They are doing this to stop inflation from getting out of control.
The signals made people worry that high inflation and rising interest rates could cause a recession in 2023. Asian markets lost a lot of money over the next three days because of how bad this news was.
China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell by 2% and 1.4%, respectively, after the People’s Bank kept its benchmark lending rates at all-time lows. Even though the move shows that the Chinese government is keeping policy at a friendly level, local stocks were sold off because investors were worried about a Chinese economic reopening. This was especially true as the number of COVID-19 cases in the country rose to levels that no one could have predicted.
Asian stock markets, which have a lot of technology, also lost a lot of money because interest rates might go up. The Hang Seng index and the Taiwan Weighted index both fell by about 1.9%, and the KOSPI in South Korea fell by 0.8%.
Both the BSE Sensex 30 and the Nifty 50 indexes in India fell by 1% because major technology stocks lost value.
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Most Asian markets are trading much lower than they were at the beginning of the year. This is because rising interest rates have made investors shy away from high-risk investments. Fears of a coming recession have also hurt hopes for a “Santa Claus” rally at the end of the year.