Asian stocks muted, yen calms as BOJ stands pat on rates

19 Mar 2025

Asian stocks struggled after Wall Street's sharp decline, as trade tensions and geopolitical risks dampened sentiment. The yen steadied following the Bank of Japan’s rate decision, while the euro hovered near a five-month high after Germany's debt overhaul. Investors await the Federal Reserve's policy decision for further market direction.

Asian stocks stutter after Wall Street falls sharply overnight

Worries over tariffs, trade and geopolitics dent sentiment

Euro near five-month high after Germany passes debt overhaul

Yen steadies after BOJ stands pat on rates as expected

SINGAPORE, March 19 (Reuters) - Asian stocks were subdued on Wednesday and gold hovered near record highs as economic worries and a shifting geopolitical landscape kept risk appetite in check, while the yen steadied after the Bank of Japan held rates as expected.

The yen was last at 149.33 per dollar, little changed on the day after a choppy initial reaction as policymakers sought to spend more time gauging how mounting economic risks from higher US ariffs could affect Japan's fragile recovery.

Rising odds of the Japanese central bank raising interest rates have helped push the yen 5% higher against the dollar so far this year, with it touching a five-month high of 146.545 per dollar last week.

Having just raised interest rates in January, the BOJ board voted unanimously to maintain the bank's short-term policy rate at 0.5% at a two-day meeting that ended on Wednesday.

"In the end, however, it is a question of 'when' not 'if' the BoJ will hike again," said Fred Neumann, chief Asia economist at HSBC.

"The next move could come as early as June, as more evidence of wage increases trickles in. The uncertain global trade outlook, however, could even push the next BoJ rate hike well into the second half of 2025."

The focus will now be on Governor Kazuo Ueda's post-meeting press conference at 0630 GMT for clues on how soon the bank could next raise rates, a decision complicated by the contrast between benign domestic data and uncertainty caused by US President Donald Trump's trade policies.

Charu Chanana, Saxo's chief investment strategist, said without stronger signals from Ueda, expectations for a May move by the BOJ could weaken, reinforcing near-term yen softness.

Investors exercised caution ahead of a monetary policy decision from the Federal Reserve on Wednesday,

Japan's Nikkei was 0.69% higher, staying near the levels it traded at before the decision.

The euro remained close to the five-month high it reached on Tuesday after Germany's parliament approved plans for a significant increase in spending, handing conservative leader and the chancellor-in-waiting Friedrich Merz a huge boost.

Geopolitical tensions escalated as Israeli airstrikes pounded Gaza and killed more than 400 people on Tuesday, shattering nearly two months of relative calm since a ceasefire began, unnerving investors.

Adding to the unease, Russian President Vladimir Putin agreed to temporarily stop attacking Ukrainian energy facilities but refrained from endorsing a full 30-day ceasefire.

"While Russia-Ukraine ceasefire talks are ongoing, most feel that we're no closer to anything truly tangible and a lasting agreement," said Chris Weston, head of research at Pepperstone.

That left investor sentiment fragile and market moves muted, with MSCI's broadest index of Asia-Pacific shares outside Japan down 0.11%.

Indonesian shares swung between gains and losses in choppy trading on Wednesday, a day after the stock market there clocked its sharpest fall in nearly three years on Tuesday, on concerns over the government's fiscal strategy.

US stocks fell sharply on Tuesday as investors exercised caution ahead of a monetary policy decision from the Federal Reserve, while gauging the potential impact of Trump's tariff policies.

The Fed up next

The BOJ's decision came hours before the policy decision from the Fed, where the US central bank is expected to hold interest rates steady. The focus will be on new economic projections from policymakers as well as comments from Fed Chair Jerome Powell.

The dollar index , which measures the US currency against six rivals, was steady at 103.34, hovering near the five-month low it touched in the previous session.

"The Fed, just like the market, desperately needs some visibility on trade, tariffs and overall policies, and we expect Powell to avoid ifs and buts and instead continue to advocate for a data-dependent approach," said Julien Lafargue, chief market strategist at Barclays Private Bank and Wealth Management.

Traders are pricing in 58 basis points of easing this year from the Fed, with the first cut fully priced in for July, LSEG data showed.

In commodities, Brent crude futures eased 0.24% to $70.39 a barrel, while US West Texas Intermediate crude slipped 0.2% to $66.75 in early trading.

Gold prices eased to $3,029 per ounce, just below the record high touched on Tuesday as geopolitical jitters led to safe-haven flows.

Reporting by Ankur Banerjee in Singapore; Editing by Jacqueline Wong and Jamie Freed

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