Japan stocks edge higher as investors eye BOJ, Fed paths

TOKYO: Japanese shares posted small gains on Monday as cautious traders awaited a week of important US and global economic data as well as testimony by the incoming Bank of Japan (BOJ) leadership team. The Nikkei edged up 0.07% to 27,531.94 at the close, staying near the middle of its range since Jan. 24.

The broader Topix gained 0.39% to 1,996.78.

The Nikkei underperformed mostly due to weakness in index heavyweight chip stocks that followed Wall Street’s declines on Friday, while a rise in US bond yields lifted financial shares and drove gains on the Topix.

Declines in energy shares also stood out on the Nikkei amid a slide in crude oil prices, though earnings produced a big winner in tiremaker Yokohama Rubber, which soared 10.2%. Of the Nikkei’s 225 components, 162 rose while 59 fell, with four flat.

The Nikkei is likely to keep to a range of about 300 points on either side of 27,500 as investors await trading cues, said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. Despite the jump for Yokohama Rubber, “earnings have not been very good this season, and I can’t be very optimistic about the outlook as it is still murky,” he said.

“A lot depends of moves by the US and Japanese central banks, and the dollar-yen exchange rate.” Strong US economic data and largely hawkish Federal Reserve commentary have been feeding expectations of higher interest rates for longer.

Inflation figures this week will be parsed for further clues, as will key purchasing manager surveys from the United States and other major economies.

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The main event for Japanese markets though will be BOJ Governor nominee Kazuo Ueda’s lower house testimony on Friday, which will be followed by an upper house appearance next Monday.

While Ueda has shown himself so far to be a policy dove, investors still expect an end to unpopular yield curve controls during his tenure, and will watch for indications of how soon that could be done.