Asian stocks muted as Fed cheer wanes; Nikkei rallies on ultra-dovish BOJ

investing.com:

Investing.com-- Most Asian stocks kept to a tight range on Tuesday as a recent post-Federal Reserve rally appeared to be cooling, while Japanese markets shot up after the Bank of Japan maintained its ultra-dovish course.

Regional markets took few positive cues from a strong overnight session on Wall Street, as U.S. stock benchmarks ended close to record highs. A slew of Fed officials attempted to downplay bets that the Fed was completely pivoting away from its hawkish stance, given that inflation still remained elevated.

The comments from the Fed officials somewhat dampened optimism that interest rate cuts from the central bank were imminent, although markets still remained biased towards a March 2024 rate cut.

Dovish signals from the Fed- that it was done raising interest rates and will look at rate cuts in 2024- drove stellar gains in Asian stocks over the past week.

The Nikkei 225 surged 1.2%, buoyed chiefly by industrial and technology stocks after the BOJ kept short-term rates at negative levels and said it will continue with its yield curve control measures.

Markets were wary of any signals from the bank on when it plans to begin tightening policy in 2024. But the BOJ offered scant cues on any such plans, and said it will maintain its stimulus measures amid persistent risks to the Japanese economy.

Pressure still remains on the bank to consider tightening policy, with Japanese inflation trending well above the BOJ’s 2% annual target for nearly two years. The BOJ said that inflation will likely remain sticky in the coming months, although its pace of growth is expected to moderate.

The BOJ’s ultra-dovish stance was a key boost for Japanese stocks this year, with Nikkei trading just shy of 33-year peaks touched last