Japanese stocks are poised for gains on Wednesday, following a record-breaking session in US markets, as traders await key monetary policy decisions from the Federal Reserve (Fed) and the Bank of Japan (BOJ).
Futures indicate a rise of more than 1% for Tokyo shares, while markets in Sydney are projected to decline, and Hong Kong remains closed for a holiday.
The US S&P 500 index closed slightly higher after reaching an all-time high, supported by stronger-than-expected retail sales. Traders are divided on the size of the Fed’s potential rate cut, with market odds now suggesting a 50% chance of a half-point reduction in interest rates. The Fed’s decision is expected later Wednesday, while the BOJ will make its policy announcement on Friday.
Treasury yields edged higher, with short-term maturities leading the increase. The uncertainty surrounding the size of the Fed’s rate cut has fueled risk assets, including Bitcoin and oil. Analysts note that investor reaction could be pivotal, as a smaller rate cut might signal concerns about the economy, while a larger one could indicate the Fed’s confidence in managing risks.
In Japan, the BOJ is expected to maintain its current policy, with discussions on whether conditions are ripe for a rate hike later this year. Governor Kazuo Ueda is set to address these issues in Friday’s meeting. Meanwhile, the yen weakened over 1% against the dollar, reversing a recent rally driven by speculation of diverging policies between the Fed and BOJ.
