Asian stocks mixed with Japan fluctuating over impending rate cut

Hong Kong: Asian stock markets were modestly mixed on Thursday, with Japan shares fluctuating amid growing speculation the country's central bank would soon cut interest rates to revive its contracting economy.

The lacklustre trade came after Wall Street dipped as early enthusiasm about the Federal Reserve's historic rate cut gave way to concerns that a turnaround in the US economy was still far off.

In Tokyo, the Nikkei 225 stock average was up 32.19 points, or 0.4 per cent, at 8,644.71 after flitting in and out of negative territory. Hong Kong's Hang Seng Index lost about 0.9 per cent to 15,326.59.

Benchmarks in Australia, South Korea and mainland China edged higher, while those in Singapore and the Philippines declined.

The dollar recovered slightly from 13-year lows against the yen, trading at 87.86 yen, up from 87.21 earlier.
"This is not the start of a bull market, it's still a bear market rally," said Francis Lun, general manager of Fulbright Securities Ltd. "The economy is still in the doldrums, and I think people are thinking the zero interest rate policy is due to a long recession ahead."

The US rate cut has raised expectations the Bank of Japan will follow suit and slash its key rate to nearly zero when it wraps up a two-day meeting on Friday. Goldman Sachs predicts the bank will shave its overnight call rate target from the current 0.3 per cent to 0.15 per cent, while JP Morgan forecasts a cut to 0.1 per cent.

Financials gained on the speculation, with megabank Mitsubishi UFJ Financial Group Inc. adding 2.1 per cent. Sumitomo Mitsui Financial Group Inc., Japan's second-largest by market value, soared 7 per cent.

Meanwhile, Honda dropped 3.4 per cent a day after Japan's No. 2 carmaker said it was slashing its annual profit forecast due to the global slowdown.