Asian Markets Slip as Precious Metals Cool, Geopolitical Tensions Weigh on Sentiment 
Bank of Japan Poised for Historic Rate Hike as Inflation Pressures Persist 
Bank of Korea Expected to Hold Interest Rates as Weak Won Limits Policy Easing 
South Korea Factory Activity Returns to Growth in December on Export Rebound 
Asian Markets End Year on AI Optimism as Precious Metals and Currencies Shine 
Trump Delays Tariff Increases on Furniture and Cabinets for One More Year 
Fed’s Anna Paulson Signals Rate Cuts May Come Later as Inflation Cools and Labor Market Stabilizes 
South Korean Won Slides Despite Government Efforts to Stabilize Currency Markets 
China Manufacturing PMI Rebounds in December, Offering Boost to Economic Growth Outlook 
Gold Prices Rebound in Europe as Geopolitical Tensions and Fed Outlook Support Bullion 
U.S. Stocks Slip as Gold Rebounds Ahead of Year-End, Markets Eye 2026 Outlook 
U.S. Stock Futures Slip as Year-End Trading Turns Cautious 
The Bank of Japan (BOJ) is widely expected to keep interest rates unchanged at the end of its two-day policy meeting on January 23, as policymakers wait for clearer signals on Japan’s economic trajectory. The central bank is anticipated to maintain its policy rate at 0.75%, following a 25 basis point hike in December, but analysts caution that the tone of the BOJ’s statement could lean hawkish amid a weak Japanese yen and persistent inflation pressures.
At its last meeting, the BOJ indicated it was prepared to raise interest rates further in 2026 if wage growth, economic expansion, and inflation continued to align with its forecasts. However, expectations for an immediate hike remain low, with most analysts predicting the central bank will stay on hold until at least March. A key factor influencing this decision is the outcome of Japan’s spring wage negotiations, which have delivered strong pay increases over the past two years and are critical for sustaining inflation above the BOJ’s 2% target.
Market attention is also centered on Japan’s political landscape, particularly expectations of looser fiscal policy under Prime Minister Sanae Takaichi, who recently announced a snap election for early February. Concerns over how increased government spending will be financed have weighed heavily on the yen and triggered a selloff in Japanese government bonds. As a result, the USD/JPY pair surged to around 159 earlier this month, marking a 2.5-year high.
Any hawkish signals from the BOJ, especially comments highlighting the inflationary impact of a weaker yen, could provide near-term support for the Japanese currency. Conversely, a cautious stance or signs of cooling inflation, with December CPI data expected to show moderation, may reinforce yen weakness. ING analysts suggest that while headline inflation may ease, strong wage growth and government support should keep core inflation above 2%, paving the way for another rate hike later in 2026.
Japanese equities have remained resilient despite tightening expectations, with the Nikkei 225 and TOPIX hovering near record highs. Bank stocks could benefit from higher rate prospects, while export-oriented shares may face pressure if the yen strengthens following the BOJ decision.
