Asia report: Markets mixed as BoJ stands pat on rates
By Josh White
Date: Friday 19 Sep 2025
(Sharecast News) - Asia-Pacific equities delivered a mixed performance on Friday as investors digested the Bank of Japan's decision to leave interest rates unchanged, with Japanese shares retreating while gains elsewhere in the region provided some support.
Patrick Munnelly, market strategy partner at TickMill, said: "A record-setting global stock surge encountered a setback following the Bank of Japan's announcement to start liquidating its substantial exchange-traded fund holdings, which pulled Asian markets down.
"The MSCI Asia Pacific Index fell by 0.4%, and the Nikkei-225 Stock Average declined nearly 0.7%.
"Initially, Asian markets had risen after four major US stock indices reached record highs simultaneously for the first time since November 2021.
"Gold prices increased while Treasury yields saw a slight drop. Futures for US and European equities also experienced a downturn."
Markets mixed after week of central bank decisions
Japan's benchmark Nikkei 225 fell 0.63% to close at 45,019.00, having earlier erased gains after the BoJ held its policy rate steady at 0.5%, matching expectations from a Reuters poll.
Munnelly noted that "Japanese shares reversed their earlier upward trend after the BoJ disclosed its approach to sell ETFs at a scale reminiscent of stock disposals from banks back in the 2000s.
"The central bank maintained its policy rate at 0.5% as anticipated, following a 7-2 vote.
"The yen appreciated by 0.3% against the dollar, and two-year bond yields in Japan reached their highest levels since 2008."
The decision came as Japan's core inflation eased to 2.7% in August, its lowest since November 2024 and the third consecutive monthly decline.
Fast Retailing led losses, down 4.49%, while Sharp Corporation was off 4.36%, and Sumitomo Metal Mining dropped 3.94%.
The broader Topix index slipped 0.35% to 3,147.68.
Chinese markets also edged lower, with the Shanghai Composite down 0.3% at 3,820.09 and the Shenzhen Component easing 0.04% to 13,070.86.
Heavy losses came from Shanghai Construction Group, down 10.05%, Chongqing Qianli Technology, off 10.02%, and Kingfa Sci&Tech, which shed 10.01%.
Hong Kong's Hang Seng Index was broadly flat, adding 0.001% to 26,545.10 as strength in casino operators lifted sentiment.
Sands China gained 6.19%, China Hongqiao Group rose 4.67%, and Galaxy Entertainment Group advanced 4.22%.
South Korea's Kospi 100 fell 0.44% to 3,556.26, pressured by declines in Hyundai Glovis, down 5.12%, Hanjinkal, off 4.66%, and LF Co, which lost 4.49%.
In contrast, Australia's S&P/ASX 200 rose 0.32% to 8,773.50, led by Generation Development Group up 6.78%, Telix Pharmaceuticals climbing 6.37% and AP Eagers gaining 4.97%.
New Zealand's S&P/NZX 50 outperformed, advancing 0.85% to 13,231.66 as Freightways rose 4.61%, Ebos Group added 4.33% and Mainfreight climbed 2.51%.
In currency markets, the dollar was last down 0.15% on the yen to trade at JPY 147.78, as it rose 0.09% against the Aussie to AUD 1.5137, and advanced 0.1% on the Kiwi, changing hands at NZD 1.7017.
Munnelly added that "there is growing apprehension regarding the S&P 500's relentless ascent to new highs, with concerns that it may lead to a bubble due to its inflated valuations.
"Investors also have their eyes on an upcoming phone call between Trump and Chinese President Xi, scheduled for later Friday.
"This discussion may influence the outcome for TikTok and potentially alleviate trade frictions between the two largest economies in the world."
Oil prices slipped, with Brent crude futures last down 0.68% on ICE at $66.98 per barrel, and the NYMEX quote for West Texas Intermediate falling 1.01% to $62.93.
BoJ keeps rates on hold as consumer inflation slows
At the top of the regional agenda was the Bank of Japan, which left its benchmark interest rate unchanged at 0.5% on Friday while signalling plans to begin selling off its vast holdings of exchange-traded funds, as policymakers sought more clarity amid political upheaval and global economic uncertainty.
Economists widely expected the decision, reached by a 7-2 vote at the end of a two-day meeting,.
It marked the first time the central bank had flagged a plan to unwind its roughly JPY 37trn in ETF holdings, which made it the largest single owner of Japanese equities during its now-ended era of massive monetary easing.
The policy announcement came days after prime minister Shigeru Ishiba said he would resign, triggering a leadership race about a year after the previous contest.
Officials were also monitoring the impact of recent US tariffs despite Japan having secured a new trade agreement with Washington.
Fresh data showed Japan's consumer inflation slowed sharply in August as government utility subsidies kicked in, though underlying price pressures remained above the Bank of Japan's 2% target.
Core consumer prices excluding fresh food rose 2.7% year on year, down from 3.1% in July and the weakest pace since November, in line with forecasts.
A deeper gauge excluding both energy and fresh food climbed 3.3%, only slightly below the prior month.
Energy prices dropped 3.3%, the steepest fall since January 2024, while subsidies shaved about 0.26 percentage point off the headline index.
Food price growth also moderated, with processed foods rising 8% versus 8.3% in July and rice price gains slowing to 69.7% from 90.7%, though items such as chocolate, coffee, sushi, chicken and eggs continued to climb.
Service prices rose 1.5% for a third consecutive month, while gasoline prices ticked up 0.6% after falling in July. Analysts said the figures were unlikely to alter Friday's decision.
In New Zealand, the trade deficit widened in August as exports fell sharply.
The monthly shortfall rose to NZD 1.19bn from NZD 578m in July, while the rolling 12-month deficit narrowed to NZD 2.99bn from NZD 3.94bn.
Exports fell to NZD 5.94bn from NZD 6.71bn, while imports eased to NZD 7.12bn from NZD 7.28bn.
Reporting by Josh White for Sharecast.com.
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