Asia stocks fall; Bank of Japan holds rates steady, warns of inflation risks driven by oil prices

Investing.com - Asian stocks fell on Thursday, led by Japan’s benchmark index, after the Bank of Japan kept interest rates unchanged and warned that soaring oil prices and escalating Middle East conflicts cast a shadow over the outlook, with inflation uncertainties rising.

Following the Federal Reserve’s hawkish signals, Wall Street declined overnight, and Asian regional markets also weakened.

During Asian trading hours, Wall Street futures were largely flat.

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Bank of Japan keeps interest rates steady, warns of inflation risks

The Bank of Japan maintained its short-term policy rate at 0.75%, in line with market expectations, choosing to pause tightening measures while assessing risks from imported inflation and external shocks.

Policy makers stated that the future trajectory of Middle East conflicts and oil prices could influence Japan’s inflation path, especially given the country’s heavy reliance on energy imports.

Board member Takada Soji voted against the decision, calling for a 25 basis point rate hike, highlighting growing internal concerns that persistent price pressures may require more decisive action.

Japan’s Nikkei 225 index fell 2.6%, while the broader Topix index declined 2%.

Rising oil prices and hawkish Fed stance weigh on Asian stocks

South Korea’s KOSPI index dropped 1.3%, and Singapore’s Straits Times Index fell slightly by 0.5%.

China’s Shanghai Composite and CSI 300 both declined 1%, and Hong Kong’s Hang Seng Index fell 1.5%.

Oil prices remain a key market driver after Brent crude surged above $110 per barrel on Wednesday and continued to rise during Thursday’s Asian trading session.

The latest rally was driven by Iran’s attacks on multiple energy facilities in the Middle East, following a strike on Iran’s South Pars gas field.

Qatar reported extensive damage to Ras Laffan energy hub caused by Iranian missile strikes, while Saudi Arabia intercepted ballistic missile and drone attacks targeting energy infrastructure.

The escalation of conflicts has heightened concerns over the potential long-term disruption of the Strait of Hormuz, which carries about one-fifth of the world’s oil and liquefied natural gas flows.

The Federal Reserve’s decision to hold rates steady but signal hawkishness on Wednesday also impacted global market sentiment.

Additionally, Australia’s S&P/ASX 200 index fell 1.5%, after data showed the country’s unemployment rate rose in February, with a decline in full-time jobs.

India’s Nifty 50 futures rose 0.4%.

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