The Nikkei share average ended Friday with a 0.52% drop to 32,402.41, following an earlier slump to a nearly month-long low of 32,154.53. This downturn was influenced by Wall Street's recent sharp declines due to anxiety over a potentially more assertive Federal Reserve.
In the midst of these events, the broader Topix index managed to curb its losses from as high as 1.2% to a smaller decrease of 0.3% by the close of trading day. These fluctuations occurred during the midday break of the equity markets.
Despite the market downturns, Japanese equities found some respite in the weakening yen, which continued its descent against the dollar. This trend followed the Bank of Japan's (BOJ) decision and moved closer to a 10-month low. The combination of Japan's relatively relaxed monetary policy and a weakening yen typically favors Japanese equities, especially those sensitive to exports.
Reaffirming its commitment to sustaining an ultra-accommodative monetary policy "as long as necessary" for achieving its inflation target of 2%, the BOJ released a statement on Friday. This declaration was closely watched, particularly in light of recent comments by BOJ Governor Kazuo Ueda.
Earlier this month, Ueda hinted in a newspaper interview that negative interest rates could end as early as this year. More details are anticipated during Ueda's press conference scheduled for half an hour after the stock market closure at 0630 GMT.
Persistent price pressures have led to speculation that the BOJ might need to adopt a more hawkish stance. Data released on Friday showed that core inflation has stayed above the central bank's target for seventeen consecutive months.
Contrary to most major global counterparts such as the Fed, who are advocating higher rates for extended periods to tackle stubborn inflation, the BOJ remains an exception by sticking to ultra-easy stimulus measures.
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