Asian stocks dip amid inflation angst; Nikkei surges on dovish BOJ bets

investing.com:

Investing.com-- Most Asian stocks retreated on Wednesday as investors remained on edge over U.S. inflation and early interest rate cuts, while Japan’s Nikkei 225 jumped to a 34-year high amid growing expectations of a delay in the Bank of Japan’s plans to tighten policy.

Regional stocks took a weak lead-in from Wall Street, as U.S. stock indexes clocked a muted close amid persistent uncertainty over early interest rate cuts by the Federal Reserve.

Asian stocks had seen some strength on Tuesday as losses in the first week of 2024 drove some bargain buying, particularly in the technology sector. But barring Japanese stocks, traders remained largely averse to risk-driven assets ahead of more cues on U.S. monetary policy.

Japan’s Nikkei 225 was a key outlier among global stock markets, surging nearly 2% on Wednesday to its highest level since the before the burst of a major speculative bubble in the 1990s.

The Nikkei’s biggest point of support was growing bets that the BOJ will have to delay its plans to begin tightening its ultra-dovish policy in 2024, especially after a devastating earthquake in central Japan.

Rebuilding and fiscal stimulus efforts in the wake of the disaster are expected to largely offset any notion of tighter policy from the BOJ, which bodes well for Japanese stocks.

The Nikkei was the best-performing major stock index in 2023 with a 30% gain, helped chiefly by a dovish BOJ as the central bank maintained its stimulative policies even as most of its peers began raising interest rates.

Weak inflation and wage growth data also pointed to less pressure on the BOJ to begin tightening policy.

Still, the Nikkei remained vulnerable to profit-taking at recent highs. The upcoming fourth quarter earnings season