Last week’s Jakota markets:
- Japan’s Nikkei 225 dropped 1.9%, pressured by BoJ rate hike speculation and yen appreciation, as fiscal surplus targets face revision
- South Korea’s KOSPI edged up 0.3%, shrugging off five straight months of foreign selling amid positive U.S. inflation data
- Taiwan’s TAIEX climbed 0.6% in volatile trading, weathering new U.S. semiconductor restrictions while maintaining allied status
- The JAKOTA Blue Chip 150 Index held steady, with one third of constituents advancing as sector performance diverged
Japan
The Nikkei 225 Index fell 1.9% this week as Bank of Japan (BoJ) officials’ hawkish comments stoked expectations of a potential rate increase at the central bank’s January 23-24 policy meeting. The yen strengthened to around ¥155.6 per dollar from ¥157.6 the previous week, dampening the earnings outlook for the nation’s export sector.
BoJ Governor Kazuo Ueda maintained the central bank’s tightening stance, confirming that rates would rise if economic and inflation conditions continue to improve. His recent comments, however, highlighted concerns about U.S. economic policies, including tariffs and fiscal measures, without clearly signalling a rate increase at the January meeting. This has led some investors to anticipate a policy rate increase being delayed until March or April.
A Reuters poll indicates expectations for the BoJ to raise interest rates to 0.50% by March 2025, with many economists predicting an increase at the January meeting. This expected move reflects the central bank’s shift towards conventional monetary policies, driven by strong domestic wage growth and rising inflation pressures.
Japan is now expected to miss its fiscal 2025 primary budget surplus target. Rising spending demands and the ruling coalition’s loss of a parliamentary majority have led to plans for an additional ¥13.9 trillion ($88.06 billion) budget. This revision, announced this week, reverses the government’s July 2024 projection that had targeted a surplus for the fiscal year beginning April 2025.
South Korea
The KOSPI index advanced 0.3% this week as foreign investors responded to the latest U.S. consumer price index (CPI) report. The data indicated slowing inflation and reinforced expectations for Federal Reserve monetary easing in 2025. Despite this positive trend, foreign investors recorded net sales of South Korean equities for a fifth consecutive month in December.
The Bank of Korea (BOK) maintained its benchmark interest rate at 3% on Thursday, citing concerns over the weak local currency amid political uncertainty and questions surrounding the new Trump administration.
Taiwan
Taiwan’s TAIEX Index rose 0.6% during a volatile week shaped by mixed signals from major global economies. China’s report of 5% annual GDP growth for 2024 and moderating U.S. inflation concerns provided offsetting market influences.
The U.S. Department of Commerce’s new restrictions on AI chip sales excluded Taiwan, which remains among 18 allied nations exempt from the measures. This development highlights Taiwan’s crucial position in the semiconductor supply chain as export controls tighten.
JAKOTA Blue Chip 150 Index
The JAKOTA Blue Chip 150 Index remained flat this week, with one-third of its 150 constituents advancing.
Fanuc, a Japanese group of companies, one of the largest makers of industrial robots in the world, led the index’s gainers. The stock maintained strong upward momentum after breaking above its 200 day moving average, which has since become a support level.
Advantest, Japan’s top manufacturer of automatic test equipment (ATE) for the semiconductor industry, recorded the index’s steepest decline.
The stock faced selling pressure amid profit taking triggered by NVIDIA share volatility, highlighting the semiconductor sector’s market sensitivity. Reports of U.S. pressure on TSMC and other chipmakers to strengthen export controls against China further contributed to the decline.
