Asian Markets Gain Strength as Japan Raises Interest Rates and Wall Street Supports Rally

Post by : Saif Nasser

Asian stock markets ended the week on a positive note as they followed gains from Wall Street, while Japan made a major move by raising interest rates to their highest level in 30 years. The decision marked another step away from Japan’s long period of very low interest rates and kept investors focused on what central banks may do next.

Markets across the region reacted calmly to the Bank of Japan’s decision to raise its key rate by 0.25 percentage points to 0.75%. This move was widely expected, so it did not cause panic. However, it sent a clear message that Japan is serious about tightening policy further if inflation stays high.

Japan’s Nikkei index rose around 1.3%, supported by strong overnight gains on Wall Street. Investors were encouraged by a rally in U.S. technology stocks, which lifted market mood across Asia. South Korea’s main index climbed 0.8%, while Taiwan’s tech-heavy market jumped 1.3%, helped by strong earnings from chipmaker Micron Technology.

A broad index tracking Asia-Pacific shares outside Japan also gained, showing that the positive mood was spread across the region. Chinese blue-chip stocks edged higher as well, supported by better global sentiment.

Despite the rate hike, the Japanese yen weakened slightly. Traders sold the yen as they waited for further guidance from Bank of Japan Governor Kazuo Ueda. Many investors believe more rate increases could come, especially since Japan’s inflation remains above the central bank’s target.

Data released on Friday showed Japan’s core inflation stayed at 3.0% in November, the same level as the previous month. This suggests price pressures are still strong. Some economists expect interest rates to continue rising over the next few years if economic growth remains steady.

Japan’s government bond yields stayed close to multi-year highs, reflecting the market’s adjustment to higher interest rates after decades of cheap borrowing.

In currency markets, the U.S. dollar edged higher against the yen, while the euro also strengthened slightly. These moves showed uncertainty about how quickly major central banks around the world may change interest rates.

European stock markets were expected to open lower, with futures pointing to small losses. In the United States, stock futures were mostly flat, as investors paused after recent gains.

U.S. market confidence was supported by data showing a surprise slowdown in inflation. However, analysts warned the numbers may have been affected by temporary factors and should not be fully trusted. Expectations for U.S. interest rate cuts changed only slightly, with markets still unsure about when the Federal Reserve will act.

In Europe, central banks sent mixed signals. The Bank of England cut interest rates but warned against moving too fast in the future. The European Central Bank kept rates unchanged and hinted that its rate-cutting cycle may be close to ending. These messages added to uncertainty in global markets.

Commodity prices were mixed. Gold slipped slightly as investors booked profits, while oil prices found some support due to worries about supply risks linked to global tensions.

Overall, Asian markets benefited from strong global cues and steady investor confidence. Japan’s rate hike marks a historic shift, but markets remain calm for now. Investors are watching central banks closely, knowing that future decisions will shape the direction of global markets in the months ahead.