Yen drops on Japan rates outlook, stocks scatter

Bank of Japan nominee Kazuo Ueda stated the case for maintaining its ultra-loose monetary policies, even as inflation surges to a four-decade high. ©AFP

London (AFP) - Equity markets moved in mixed directions Friday, while the yen dropped after the incoming head of Japan's central bank showed no intention of altering its policy of avoiding interest-rate rises.

The BoJ has so far declined to join other central banks in hiking borrowing costs in a bid to tame rapidly-rising prices of goods and services.

The outlook for global interest rates continues to dominate market direction, with investors looking to see by how much the Federal Reserve and other central banks will keep raising borrowing costs.

"A year on from the devastating invasion of Ukraine, which shocked the world, sparked runaway inflation, and led to turbulence across global markets, investor confidence is still struggling to fully recover," noted Susannah Streeter, head of money and markets at Hargreaves Lansdown.

"Volatility is set to stay a firm feature of stock markets this year as worries about the impact of high prices continue to nag investors."

Analysts said the realisation that the Federal Reserve would further hike borrowing costs and hold them there longer appears to have sunk in among investors, who were betting on a cut by year's end as 2023 began.

That has seen equities across the globe tumble this month after rallying throughout January.

Tokyo, however, rose solidly Friday as the Bank of Japan's incoming governor Kazuo Ueda said its longstanding monetary easing policies were "appropriate".

Under current boss Karuhiko Kuroda, the bank has unleashed a raft of extraordinary ultra-loose policies -- from a negative interest rate to spending vast sums on government bonds -- in a bid to boost the sluggish economy.

The comments by Ueda, who takes the helm in April, followed data showing Japanese inflation at a four-decade high of 4.2 percent.

The figure was fuelled in part by higher energy bills, while the contrast between Fed tightening and the BoJ's easing has generally driven the yen down against the dollar, making foreign goods more expensive in Japan.