Global Market: Japan’s Nikkei flat as investors await Fed, BOJ decisions

Japan’s Nikkei share average was little changed on Wednesday as investors remained cautious ahead of interest-rate decisions from the U.S. Federal Reserve and the Bank of Japan, Reuters reported.

The Nikkei was weighed down by declines in chip-related stocks, while gains in energy companies and trading houses helped limit the losses. The broader Topix index performed better, reflecting strength in some non-technology sectors.

Read more: Global Market Today: Asian stocks steady as traders await Fed decision


According to Reuters, investors were closely watching the Federal Reserve’s policy decision due later on Wednesday, with attention focused on the central bank’s guidance on the outlook for interest rates.

Fed decision in focus

Global markets have been unsettled by a sharp rise in bond yields and oil prices, increasing concerns about inflation and the path of monetary policy.

Reuters reported that the U.S. 10-year Treasury yield had climbed to around 5%, its highest level since 2007, as investors prepared for the Fed decision. Higher Treasury yields can put pressure on equity valuations and influence currency and capital flows globally.

Read more: US Treasury secretary Scott Bessent says rising bond yields due to 'global issues'

Investors are also assessing how the Fed’s policy stance could affect the Japanese yen and Japanese exporters. A stronger yen can weigh on overseas earnings when they are converted back into the domestic currency.

BOJ meeting next

Attention will then turn to the Bank of Japan, which is scheduled to announce its policy decision on Friday.

Reuters reported that the BOJ is expected to raise its policy rate to 1.25%, a 31-year high, amid persistent inflation pressures linked to higher energy and import costs. The move would represent the first increase in three months and continue the central bank’s gradual shift away from its long-standing ultra-loose monetary policy.

Markets are particularly focused on Governor Kazuo Ueda’s guidance on the possibility of further rate increases. Reuters reported that investors are also watching for indications of how policymakers assess inflation, economic growth and the impact of higher oil prices.

Yen and Japanese stocks

The prospect of further BOJ tightening has kept the yen and Japanese government bonds in focus. Expectations for higher Japanese interest rates can support the yen by narrowing the gap between Japanese and overseas borrowing costs.

Japanese government bond yields have also risen amid inflation concerns and expectations of further monetary tightening, while higher U.S. Treasury yields have added to pressure on global bond markets.

For Japanese equities, investors are weighing the benefits of a stronger domestic economy against the potential impact of higher borrowing costs and a firmer yen.

With both the Fed and BOJ meetings taking place within days of each other, market participants are expected to closely monitor the two central banks’ policy guidance for clues on the direction of global interest rates and currency markets.