Asian stock markets mostly advanced on Friday, supported by a decline in oil prices and continuing momentum from a Wall Street rally, while the Japanese yen weakened following the Bank of Japan’s decision to raise interest rates to a three-decade high.
The US Federal Reserve’s recent interest rate hike helped alleviate investor concerns about inflation spiraling out of control, particularly amid geopolitical tensions affecting energy supplies. The easing of oil prices came after Saudi Arabia announced plans to restore roughly half of the crude shipments previously disrupted by an attack on its East-West pipeline, which transports oil to the Red Sea. The pipeline had been targeted last week by Yemen’s Iran-backed Houthi rebels, exacerbating fears of a broader energy supply shock following Iran’s effective closure of the Strait of Hormuz.
West Texas Intermediate crude prices fell below $100 per barrel on Friday, with both WTI and Brent crude losing more than 2%, marking a sharp retreat from a roughly 20% increase earlier in September. This downward movement in oil prices helped reduce inflationary pressures that had been weighing on markets globally since the intensification of conflict involving the US and Israel against Iran at the end of February.
The prospect of easing inflation contributed to gains in major Asian indices, including Seoul, Tokyo, Hong Kong, Shanghai, Taipei, Mumbai, and Bangkok, while Singapore, Wellington, Jakarta, and Manila experienced declines. Sydney’s market remained largely unchanged. Investor confidence was further bolstered by the 10-year US Treasury yield holding steady below 5%, reflecting moderated expectations for borrowing costs.
In Japan, the Nikkei index benefited from a weaker yen after the Bank of Japan increased its policy rate for the first time since 1995. The central bank’s move was widely anticipated, raising rates in response to inflation nearing the 2% target amid ongoing upward pressure from rising energy prices linked to the Middle East crisis. The BoJ indicated it would continue raising rates given the current inflation trajectory and accommodative financial conditions.
However, the rate hike was not unanimous, passing by a 7-2 vote, signaling internal debate among policymakers. Market watchers noted that the dissents suggested some members viewed the move as premature, tempering expectations for an accelerated pace of future tightening. Traders reacted to this division by pushing the yen lower, with the currency falling to more than 157 per US dollar from around 156 earlier in the day.
Analysts emphasized that upcoming signals from the BoJ regarding the timing and scale of further rate increases would be closely monitored. Investors will be particularly attentive to forward rate swap curves and official guidance to gauge whether the central bank intends to expedite tightening measures amid persistent inflation concerns.