Asian stock markets gained modestly on Friday, supported primarily by rising technology sector shares, although overall gains were restrained amid cautious anticipation of the Bank of Japan's (BOJ) upcoming monetary policy decision. The central bank is widely expected to maintain its current interest rate of 0.75%, with markets closely monitoring any shifts in tone or indications for future tightening.
Earlier inflation data from Japan for December showed headline consumer price index (CPI) inflation dropped to its lowest point in nearly four years, signaling weaker price pressures. While core inflation metrics remained sticky, these figures cast doubt over the likelihood of a near-term rate hike by the BOJ. This development tempered expectations that the central bank would adopt a more hawkish position, especially following its last meeting where it signalled that rates could rise if inflation and wage growth reach forecasted targets.
The lingering weakness of the Japanese yen is another focus for the BOJ during this meeting, as prolonged depreciation might prompt commentary or adjustments. However, the consensus among analysts is that the BOJ is likely to maintain its accommodative monetary policy until at least March or April, when clearer data from spring wage negotiations will provide a better gauge on economic and wage developments.
Regional markets had taken a positive lead from Wall Street, which recorded a second consecutive session recovery after a reduction in geopolitical tensions. Notably, U.S. President Donald Trump's softened rhetoric over Greenland alleviated some initial market nervousness evident earlier in the week, allowing the S&P 500 futures to gain 0.1% by early Friday morning ET.
Despite this uplift, most Asian indices were on course to finish the week with modest losses after sharp declines at the start, prompted by the geopolitical uncertainty related to Greenland and broader worries about growing fiscal deficits in developed nations. The week’s overall performance reflects caution among investors amid mixed signals on economic growth and policy directions.
Within Asia, South Korea’s KOSPI was a standout, rising 0.6% on Friday and closing just below all-time highs, buoyed by sustained strength in technology and automotive sectors. This performance secured KOSPI as the top-performing Asian index of the week with a solid 2.5% gain.
Japan’s markets also advanced, with the Nikkei 225 increasing 0.2% and the broader TOPIX index gaining 0.7%, as investor attention remained fixed on the BOJ meeting later in the day.
Chinese markets remained relatively flat, with the Shanghai and Shenzhen CSI 300 indices trading within tight ranges. Hong Kong’s Hang Seng index posted a modest 0.4% increase, while Australia’s ASX 200 edged up 0.3% and Singapore’s Straits Times index added 0.9%, indicating some incremental optimism across the region.
Conversely, India’s Nifty 50 futures fell 0.2% on Friday, capping a week where the benchmark index declined about 1.6%, lagging behind regional counterparts. Investors remained cautious amid the absence of progress on a U.S.-India trade deal and were further dampened by a series of weak earnings reports from major Indian corporations.