Japan’s Nikkei 225 erases gains to trade lower after BOJ keeps interest rate steady

Japan’s benchmark Nikkei 225 index pared gains to fall 0.57% Friday, after the Bank of Japan kept its policy rate steady at 0.5%, in line with the forecast from a Reuters poll of economists.

The benchmark index had hit a fresh record high for a second consecutive session earlier in the day. The index closed at 45,045.81, while the Japanese yen appreciated by 0.14% against the dollar to 147.80.

The decision to hold rates comes as Japan’s core inflation rate in August fell to its lowest since November 2024 at 2.7%, marking a third straight month of decline.

The core inflation figure — which strips out prices of fresh food — was in line with the 2.7% expected by economists polled by Reuters. Headline inflation in the country also dropped to 2.7%, coming down from 3.1% in July and marking a fresh low since November 2024.

“The Bank of Japan’s decision to hold rates steady underscores its cautious stance amid slowing inflation and global uncertainty – prioritizing stability over premature tightening,” said Hiroaki Amemiya, investment director at Capital Group. “By preserving policy optionality, the BoJ is signaling its readiness to respond to external volatility while continuing to assess the strength of Japan’s economic recovery.”

“The BoJ’s strategy supports the early stages of a reflationary cycle, rather than reversing course,” Amemiya added.

Yields on Japan’s 2-year government bonds rose to 0.885%, marking the highest since June 2008, LSEG data showed.

Meanwhile, the Topix declined 0.35% to close at 3,147.68

Australia’s ASX/S&P 200 climbed 0.32% to end the trading day at 8,773.5. South Korea’s Kospi lost 0.46% to end at 3,445.24, while the small-cap Kosdaq added 0.7% to close at 863.11.

Hong Kong’s Hang Seng Index closed flat at 26,545.1, while the mainland’s CSI 300 was little changed at 4,501.92. Zijin Gold, a subsidiary of China’s largest gold miner Zijin Mining, was looking to raise about HK$25 billion ($3.2 billion) in a Hong Kong IPO, a company filing showed Friday.

The firm is offering almost 349 million shares at HK$71.59 apiece, with trading scheduled to start Sept. 29.

India’s Nifty 50 declined 0.55%. Adani’s flagship Adani Enterprises jumped over 4% after India’s market watchdog absolved Adani Group and its founder Gautam Adani of certain misconduct allegations made by Hindenburg Research.

Overnight in the U.S., the major averages closed higher with smaller equities seeing the biggest boost, after the Federal Reserve signaled it was embarking on an easing rate path, reinvigorating investors and raising hopes for a ratcheting up of economic growth.

The S&P 500 closed up 0.48% at 6,631.96, while the Nasdaq Composite popped 0.94% to settle at 22,470.73. The Dow Jones Industrial Average added 124 points, or 0.27%, to close at 46,142.42.

Each of the major U.S. indexes notched a fresh all-time intraday high on Thursday, just a day after stocks had a volatile trading session Wednesday in the wake of the Fed’s rate cut.

— CNBC’s Pia Singh and Alex Harring contributed to this report.