Global Market: Japan stocks mixed as strong data boosts rate-hike bets

Japanese shares were little changed on Tuesday as investors weighed stronger-than-expected domestic economic data against a firmer yen and rising expectations that the Bank of Japan will raise interest rates next week, according to a report by Reuters.

The benchmark Nikkei 225 gained 0.31% to 66,608.42 in early trading, while the broader Topix slipped 0.51% to 4,104.89.

With U.S. markets closed for a holiday on Monday, trading cues were limited, leaving investors focused on domestic economic indicators. Revised data released on Tuesday showed Japan's gross domestic product expanded faster than initially estimated in the second quarter.


Separate data showed real wages increased 2.4% in July from a year earlier, marking their strongest rise since May 2021 and providing further evidence of improving household purchasing power.

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BOJ rate-hike expectations weigh on sentiment

Markets are now pricing in a near certainty that the Bank of Japan will raise its policy rate to 1.25% at its meeting next week. The yen continued to strengthen, touching 153.37 per dollar, its strongest level since February.

According to Reuters, expectations of a near-term BOJ rate hike and the yen's appreciation are likely to keep Japanese equity trading subdued, as a stronger currency can weigh on exporters by reducing the value of overseas earnings when converted into yen.

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Energy stocks outperform

Among Topix industry groups, oil and coal product shares led gains, rising 1.54%. Transportation equipment stocks were among the biggest laggards, falling 2.51%, while rubber makers declined 2%.

Market breadth on the Nikkei remained weak, with 57 stocks advancing, 163 declining and five unchanged.

Taiyo Yuden was the biggest decliner, falling 4.90%, followed by Mercari, which dropped 4.77%, and JTEKT, which declined 4.66%.

On the upside, SoftBank Group surged 6.24%, making it the Nikkei's strongest percentage gainer. Nitori Holdings advanced 4.54%, while Denka rose 2.65%.

Investors are likely to remain focused on the yen's trajectory and incoming economic data as they assess the timing and pace of further monetary tightening by the Bank of Japan.