Japanese stocks, bonds fall ahead of BOJ decision: Markets wrap

Japanese stocks dropped and government bond yields rose ahead of a potentially market-moving decision from the nation’s central bank, the highlight of an event-packed day in Asia.

Equity benchmarks dropped more than 1% in Japan. Those in South Korea climbed, buoyed by gains in Samsung Electronics Co. after the chipmaker reported its fastest pace of profit growth since 2010. Contracts for Hong Kong were little changed.

The mixed moves came after the world’s largest technology companies extended losses in late US hours as Microsoft Corp.’s results fueled concern the artificial-intelligence frenzy market might have gone too far. A rotation out of big tech has dragged the Nasdaq 100 down 9% from its all-time high — leaving it on the cusp of a correction.


The yen strengthened slightly against the dollar with just hours left for the BOJ to release its decision. Japan’s 10-year yield advanced six basis points to 1.055% following an NHK report that BOJ board members will discuss raising interest rates to around 0.25% on Wednesday from the current range of 0 to 0.1%.

“Given the tight relationship between the yen and Nikkei, not to mention the huge influence Japan has over global financial flows, today’s meeting could be a source of meaningful volatility,” said Kyle Rodda, a senior market analyst at Capital.Com.

Treasury yields advanced after falling in the previous four sessions. Markets are gearing up for monetary policy decisions from the Federal Reserve later Wednesday. Australian 10-year notes climbed early Wednesday as traders look to the country’s inflation data for policy clues.

Goldman Sachs Group Inc.’s chief David Solomon told CNBC that one or two Fed rate cuts later this year are looking increasingly likely. That’s after predicting just two months ago there would be no reductions in 2024.

“If the Fed does not signal a September rate cut, markets could get a bit ugly given recent tech weakness — especially if earnings underwhelm,” said Tom Essaye at The Sevens Report.

In Asia, investors are also awaiting China’s PMI survey readings that may show the recovery continued to sputter entering the second half of 2024.

Elsewhere, oil rose for the first time in four session after an industry report pointed to a fifth week of drawdowns in US crude stockpiles.

The S&P 500 fell to around 5,435 on Tuesday. The Nasdaq 100 slid 1.4%. A gauge of the “Magnificent Seven” megacaps sank 2%. The Russell 2000 of small firms rose 0.3%. Nvidia Corp. tumbled 7%, wiping $193 billion from its market value.

If the Fed is about to begin a rate cutting cycle, stock bulls have history on their side. In the six prior hiking cycles, the S&P 500 has risen an average 5% a year after the first cut, according to calculations by the financial research firm CFRA. What’s more, the gains also broadened, with the small-cap Russell 2000 Index climbing 3.2% 12 months later, the data show.