Friday, December 19, 2025, at the Bank of Japan (BOJ) Head Office in Tokyo. Photographer: Akio Kon/Bloomberg via Getty Images
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Asia-Pacific markets rose on Friday, tracking Wall Street gains as geopolitical concerns eased and investors appreciated the Bank of Japan’s decision to keep interest rates on hold.
Japan’s central bank left its key policy interest rate unchanged at 0.75% as Prime Minister Sanae Takaichi, who advocates monetary easing and fiscal support, prepares for an election in which she will face voters for the first time. Mr. Takaichi dissolved Japan’s House of Representatives on Friday, and a snap general election is scheduled to be held on February 8.
Japan’s 40-year government bond yield fell more than 4 basis points to 3.953% after hitting a record high on Tuesday.
Meanwhile, yields on bonds with shorter maturities rose. The yield on 10-year Japanese government bonds rose about 2 basis points to 2.259%, while the yield on 20-year government bonds rose less than 1 basis point to about 3.204%.
Bank of Japan Governor Kazuo Ueda said it was still too early to fully assess the impact of past interest rate hikes and noted that Japan’s financial conditions remained accommodative despite the policy shift, according to a Reuters translation.
Ueda said at a press conference after the meeting that corporate demand for funds continues to increase moderately and banks continue to actively lend.
He added that the central bank needs more time to determine how December’s interest rate hike will ripple through the economy and will continue to closely monitor developments.
According to Ruseg data, the yen fell to the 159 yen level against the dollar, before appreciating to 157.3 yen within minutes.
HSBC expects the Bank of Japan’s next 25 basis point interest rate hike to be in July 2026, but warned that further weakness in the yen could push the timing forward and open the door for further rate hikes.
The bank cited April as a possible alternative, citing the release of the Bank of Japan’s quarterly outlook report and improved clarity in this year’s spring wage negotiations, which could lead to a further 25 bps rate hike in the second half of 2026.
Japan’s headline inflation rate slowed sharply to 2.1% in December, the lowest level since March 2022. Core inflation was 2.4% year-on-year, in line with analysts’ expectations.
Japanese Nikkei Stock Average closed 0.29% higher at 53,846.87, while Topix rose 0.37% to 3,629.7. South Korea’s Kospi rose 0.76% to 4,990.07, while the small-cap Kosdaq rose 2.43% to 993.93.
Some Asian tech stocks fell after shares of California-based Intel Corp. plunged 13% in U.S. after-hours trading on a weak outlook for the current quarter, despite reporting higher fourth-quarter profits on Thursday. SoftBank Group fell more than 4%, and Lasertec fell nearly 6%. Tokyo Electron fell more than 1%. South Korea’s SK Hynix fell 1%.
Hong Kong’s Hang Seng Index rose 0.41%, while the CSI300 Index fell 0.45% to 4,702.50.
Australia’s S&P/ASX 200 index rose 0.13% to 8,860.1.
