Asian stocks waver as policy uncertainty, weaker oil sap confidence

The Bank of Japan and U.S. Federal Reserve both meet next week.

Perceived limits to the extensive monetary easings led by major central banks like the European Central Bank and the Bank of Japan have also soured broader risk sentiment, driving global debt yields higher.

Yield curves can have a very different meaning for the evolution of currencies.

Some BOJ officials still favour increasing government-bond purchases if the board decides it needs to expand stimulus, according to people familiar with the discussions.

By comparison, during Japan's longest bout of deflation from mid-1998 to late 2007, real rates averaged plus 1.8 per cent.

BOJ Gov. Haruhiko Kuroda acknowledged this month that the negative-rate program has hit profits at financial institutions, but said it hadn't hurt bank lending.

The impending US election and the possibility of US Federal Reserve interest rate rises are not the only drivers of volatility, Eaton Vance said, adding that the actions and comments of other central banks were also playing a role.

In currencies, the dollar extended yesterday's losses against the yen, falling 0.2 per cent to ¥101.88 (RM4.12). It's worthwhile to reiterate that the BoJ's policy objective is to achieve its 2% price stability goal as soon as possible.

Doves, such as Fed Governor Lael Brainard, are likely to be supported by Thursday's data in arguing that inflationary pressures do not appear to exist and that, claims of full employment notwithstanding, job markets have considerable slack remaining. It will thus maintain a pledge to increase its bond holdings at an annual pace of 80 trillion yen (US$782 billion).

"But maybe the BOJ news had an effect".

Meanwhile, Asian markets mostly fell on Wednesday as uncertainty over the future of central bank monetary policy weighed on buying interest while warnings of an extended oil glut sank energy firms.

Investors will be keeping their fingers crossed that as BoJ policymakers discuss keep an eye on the potential fallout for global bond markets as they discuss their various monetary stimulus options.

In US Equity Markets stocks rallied 1 percent on Thursday, buoyed by Apple's best four-day run since 2014, higher oil prices and ho-hum economic data that further dimmed expectations for an interest rate hike next week.

"Investors are waking up to the fact that valuations are high and these record-low interest rates won't be with us forever", Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, told Bloomberg News.

With negative rates deeply unpopular among the public, the BoJ may go down the route of expanding bond buying if it sees the need to ease policy.

On Wednesday, yields on eurozone bonds were already starting to fall again as investors speculated that the European Central Bank will eventually be forced to provide more stimulus to lift the stubbornly low inflation rate.

The Nikkei reported that at its policy meeting next week, the Bank of Japan intends to delve deeper into negative interest rates, while conducting an operational twist to steepen the yield curve. Only seven said they were less convinced.

The dollar rose against the yen in morning US trading on expectations the BOJ could ramp up its monetary stimulus after reports in recent days that the central bank could turn more accommodative.