Traders in Asia were cautious on Monday after US shares receded, and as anticipation builds for the Bank of Japan to finally ditch its negative interest rate.
Dampened hopes for Fed rate cuts led Wall Street to close lower on Friday, with a sharper-than-expected jump in US wholesale price data reinforcing expectations that the US central bank will stand pat this week.
"Market conditions are unlikely to ease as traders navigate choppy waters ahead of the Federal Open Market Committee (FOMC) meeting," said Stephen Innes of SPI Asset Management.
"All eyes are on whether the Fed will adjust its rate hike outlook for 2024," he said, and "uncertainty around this pivotal event may temper market activity in the coming days".
The US Federal Reserve is one of a slew of policy decisions this week, including from the Reserve Bank of Australia, the Bank of England and the Swiss National Bank.
But analysts expect only one central bank to make a major move -- the Bank of Japan, which wraps up its two-day policy meeting on Tuesday.
The influential Nikkei business daily reported that the BoJ plans to raise interest rates for the first time since 2007.
Strong wins for workers in annual pay negotiations have also pointed to the bank ending its outlier negative rate policy designed to boost the flagging economy.
Tom Kenny, senior international economist at ANZ, said that even if it does raise rates, guidance from the BoJ's governor Kazuo Ueda "is likely to be dovish".
"He has previously said that policy will remain accommodative after the removal of the (negative interest rate policy) and has ruled out the possibility of successive rate hikes," Kenny noted.
In morning trade on Monday, Tokyo was up 2.1 percent, while other Asian stocks were mixed.
Seoul gained 0.4 percent and Manila added 1.2 percent, but Wellington dropped 0.4 percent and Sydney was down 0.1 percent along with Singapore. Bangkok fell 0.6 percent.
Chinese stocks also diverged as Beijing released key economic indicators including retail sales and economic production.
Hong Kong was down 0.1 percent but Shanghai put on 0.5 percent.
"China's economy had a stronger start to the year than expected, with industrial production and fixed asset investment coming in surprisingly spritely," Harry Murphy Cruise of Moody's Analytics told AFP.
"Still, we should take the latest data with a grain of salt. Today's prints are inflated by this year's bigger Lunar New Year celebrations compared to those last year marred by rapidly rising Covid-19 cases," he said.
"More broadly, headwinds still remain: real estate investment continues to be a drag, deflation's reversal is likely only fleeting and export's outlook is clouded by geopolitical tensions and still-high global interest rates."
Tokyo - Nikkei 225: UP 2.1 percent at 38,521.43 (break)
Hong Kong - Hang Seng Index: DOWN 0.1 percent at 16,698.14
Shanghai - Composite: UP 0.5 percent at 3,068.98
Dollar/yen: DOWN at 148.96 yen from 149.08 yen on Friday
Euro/dollar: FLAT at $1.0891
Pound/dollar: DOWN at $1.2736 from $1.2737
Euro/pound: UP at 85.50 pence from 85.48 pence
West Texas Intermediate: UP 0.4 percent at $81.40 per barrel
Brent North Sea Crude: UP 0.3 percent at $85.62 per barrel
New York - Dow: DOWN 0.5 percent at 38,714.77 points (close)
London - FTSE 100: DOWN 0.2 percent at 7,727.42 (close)
