Asian shares rallied strongly on Wednesday after the Bank of Japan raised interest rates for only the second time since 2007 and there was news of another consumption push out of Beijing.
Higher rates will improve lending margins in Japan and boost investment income, and that saw banking shares as the big beneficiary of the BOJ’s policy decision, though investors were also digesting contrasting results from Microsoft and chipmaker AMD that suggested a divide in the AI landscape.
The Tokyo Stock Exchange’s banking index advanced 4.7%, with big gains for lenders helping the Nikkei share average to reverse earlier declines.
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The Nikkei ended the day up 1.49% at 39,101.82, after falling as much as 1.5% and recovering to the psychologically important 39,000 level for the first time in a week. The broader Topix was ahead 1.45%, or 39.81 points, at 2,794.26.
Exporter shares also recovered after the yen gave up early gains to stabilise, following volatile trading in the aftermath of the policy announcement.
The BOJ hiked the key rate target to 0.25% from near zero, and also unveiled a quantitative tightening (QT) plan that would roughly halve monthly bond buying to 3 trillion yen ($19.6 billion), from the current 6 trillion yen, as of early 2026.
Meanwhile, chip-sector shares rallied strongly after a report that some Japanese companies would be exempt from US curbs on semiconductor-manufacturing equipment exports to China.
China stocks surged too over positive signs from a Politburo meeting stressing a boost in consumption and the appointment of a new vice-chairman of the securities regulator.
Data also showed China’s manufacturing activity shrank for a third month in July, keeping alive expectations that Beijing will need to launch more stimulus.
The rally was predominantly led by consumer and tech shares, while Hong Kong stocks experienced a similar upward trend.
US Fed Policy Review
Investor sentiment was further buoyed by a firmer yuan ahead of an anticipated US Federal Reserve policy review, expected to pave the way for an interest rate cut in September.
As a result, both the blue-chip CSI300 Index, which advanced 2.16%, and the Shanghai Composite Index achieved their most substantial one-day gains in three months.
The Shanghai Composite Index rose 2.06%, or 59.45 points, to 2,938.75, while the Shenzhen Composite Index on China’s second exchange surged 3.29%, or 51.27 points, to 1,610.78.
The Hang Seng Index gained 2.01%, or 341.69 points, to 17,344.60.
Elsewhere across the region, in earlier trade, Sydney, Seoul, Singapore, Wellington, Manila and Jakarta all advanced as dealers brushed off news that Microsoft saw an increase in quarterly profit but its key cloud computing unit fell short.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 1% higher.
Futures indicated European bourses were set for a slightly higher open, with Eurostoxx 50 futures up 0.12% and FTSE futures 0.39% higher.
AI Frenzy Jitters
A Federal Reserve decision is due later in the day with markets expecting the US central bank to stand pat on rates but indicate rate cuts are on the way. Markets are fully pricing in a cut of 25 basis points (bps) in September, with roughly 68 bps of easing priced in for the year.
However, some analysts expect the Fed to stay cautious as the labour market is still tight.
Investors are jittery about the AI frenzy and tech valuations as results from tech bellwethers reinforced the idea that the payoff in hefty AI investments may take longer than first thought.
Disappointing earnings from Microsoft sent its shares lower, along with those of other tech firms, while strong earnings from Advanced Micro Devices spurred a rally in chip stocks. Nasdaq futures rebounded, and were last up 1%.
The dollar index, which measures the US currency against six rivals, was at 104.46 and is down over 1% in July.
The Australian dollar sank to a three-month low, while stocks soared more than 1% as a soft inflation report squashed lingering speculation that interest rates would have to rise again.
In commodities, US crude was 1.77% higher at $76.05 per barrel and Brent was at $79.82 per barrel, up 1.51% on the day.
Key figures
Tokyo – Nikkei 225 > UP 1.49% at 39,101.82 (close)
Hong Kong – Hang Seng Index > UP 2.01% at 17,344.60 (close)
Shanghai – Composite > UP 2.06% at 2,938.75 (close)
London – FTSE 100 > UP 1.34% at 8,385.38 (0937 BST)
New York – Dow > UP 0.50% at 40,743.33 (Tuesday close)
- Reuters with additional editing by Sean O’Meara
Read more:
Bank of Japan in Rare Rate Rise, Bond Taper Plan Unveiled
New US Chip Equipment Export Rule to Hit Taiwan, ASEAN States
China Tightens Focus on Tech Innovation, ‘New Productive Forces’
Hang Seng Dips on China Worry, Nikkei Inches Up on BoJ Hopes
