BOJ Decision Sparks Volatility Fears in Asian Markets

Asian markets rose as oil prices eased and the US dollar steadied, with traders awaiting the Bank of Japan's (BOJ) decision on interest rates. The BOJ is expected to hike rates to a 31-year high, but the market's reaction will depend on Governor Kazuo Ueda's signals on future rate increases.

The yen softened to around 156.23 per dollar ahead of the decision, with strategists at MUFG and Commonwealth Bank of Australia noting that markets have already priced in a 0.25 percentage point hike. The key factor will be whether Ueda hints at a quicker pace of tightening, which could support the yen by reducing the gap between Japanese and US interest rates.

Chris Weston at Pepperstone warned that if yields climb again, volatility could return quickly since higher yields tend to weigh on stock valuations. A weaker yen can still boost Japanese exporters' overseas earnings when translated back into yen, helping indexes like the Nikkei.