BOJ raises rates to 31-year high, lifting Asian stocks

The Bank of Japan raised its policy rate by 25 basis points to 1.25% on Friday, pushing borrowing costs to their highest level since 1995 and marking the fastest pace of rate increases since 1990. The widely expected decision, approved in a 7-2 vote, came as Japan's central bank shifted toward what Governor Kazuo Ueda described as a new phase focused on preventing inflation from overshooting its 2% target.investing+1

Asian stocks broadly gained following the move, buoyed further by a retreat in oil prices and a Wall Street rebound the previous session. Japan's Nikkei 225 climbed 1.70% to 65,228, while South Korea's Kospi jumped 2.7%. The MSCI Asia Pacific index rose about 0.5%, though gains were narrowly based, with more shares falling than rising across the region.businesstimes+1

Chip Stocks Rebound After Volatile Week

Semiconductor shares led the rally in Seoul. SK Hynix ↗ 2.46% rose 5.8% and Samsung Electronics gained 3.4%, tracking a 3.1% surge in the Philadelphia Semiconductor Index ↗ 2.77% on Thursday. The rebound followed a volatile week for the AI trade after leading AI executives called for safeguards and a slower pace of model development, triggering a selloff across the technology supply chain earlier in the week.investing

In China, the CSI 300 gained 1.1% while Hong Kong's Hang Seng rose 0.7%. Chinese AI stocks also rallied, with Alibaba ↗ 4.33% up 4.3% and JD.com ↗ 1.05% gaining 0.4%.investing

Oil Pullback and Bond Rally Ease Inflation Pressure

Brent crude fell for a third consecutive session as traders weighed possible diplomatic progress in the U.S.-Iran war. Saudi Arabia was seeking to restore about half the capacity of its East-West pipeline within days after drone strikes shut it last week, while Reuters reported that China asked Iran to help rein in Yemen's Tehran-backed Houthi militants.businesstimes+1

The oil decline helped extend a bond rally. The U.S. 10-year Treasury yield fell nine basis points overnight to 4.93% after touching 5.02% on Wednesday following the Federal Reserve's rate hike. Two board members dissented from the BOJ's decision, which some analysts described as relatively dovish, tempering expectations for the pace of further tightening. Reuters polls project the BOJ will hike rates to 1.5% by March and 1.75% by mid-2027.investing+2