Asian shares edge up, Nikkei gyrates as BOJ holds steady

TOKYO (Reuters) – Asian shares edged up on Friday, on track for their biggest monthly rise since January 2012 but headed for weekly losses as investors fretted about the possibility United States interest rates could still rise this year.

Japanese shares slipped briefly and then regained their composure, while the yen rose after the Bank of Japan held policy steady.

The BOJ kept monetary policy steady as most had expected, but some investors had speculated the central bank would deliver some additional steps to support Japan’s economy, and many still expect it to eventually deliver more easing.

“The BOJ will probably wait to see whether the Fed may move in December, before deciding to ease further,” said Hiromachi Shirakawa, chief economist at Credit Suisse Securities Japan.

“As such I expect further easing by the BOJ may come in January at the earliest but it will more likely to happen in April.

The BOJ will release new long-term economic and price forecasts in its semiannual outlook report due at 3:00 p.m. (0600 GMT), and BOJ Governor Haruhiko Kuroda will hold a news conference at 3:30 p.m. (0630 GMT) to explain the policy decision.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.3 percent, poised to lose 2.1 percent for the week but gain nearly 8 percent for October.

Japan’s Nikkei (.N225) was down 0.6 percent right after the BOJ decision, but rebounded and was last up 0.2 percent, on track for a hefty monthly gain of 9.1 percent.

Data released before the Tokyo market opened underscored how far the BOJ has to go to approach its 2 percent inflation target, with Japan’s core consumer prices falling 0.1 percent in the year to September, for their second straight month of declines.

However, separate data showed an unexpected drop in household spending but tighter labor conditions, suggesting wages might rise in the months ahead.

On Wall Street overnight, U.S. indexes posted losses but were still on track for their best monthly performance in four years. [.N]

U.S. data released overnight showed U.S. gross domestic product in July-September increased at a 1.5 percent annual rate, just shy of the consensus forecast for 1.6 percent growth and slowing from a 3.9 percent rise in the second quarter. But solid consumer spending kept alive the possibility that the Fed could deliver an interest rate increase in December.

The U.S. central bank held policy steady on Wednesday and left the door open to hike interest rates for the first time since 2006 at its Dec. 15-16 meeting.

That signal comes amid growing anxiety over a slowdown in global growth, with signs of waning momentum in China in particular stoking volatility in global markets in recent months.

Markets in China edged higher, while shares of baby goods-related companies outperformed after China’s ruling Communist Party said on Thursday it would ease family planning restrictions to allow two children for all couples.

The dollar extended losses after the BOJ policy decision, slipping to an intraday low of 120.29, and was last down about 0.2 percent at 120.83 yen (JPY=). But it was still up about 0.8 percent for the month against the backdrop of divergent monetary policy expectations.

The euro’s trend was similar, with the single currency nearly flat against the dollar at $1.0979 (EUR=) but down about 1.8 percent for the month in which European Central Bank chief Mario Draghi took a surprisingly dovish stance that suggested further monetary easing steps were possible in December.

Crude oil futures slipped after the mixed U.S. economic data exacerbated fears of oversupply and as investors took profits following a rally, but they were still on track to end a volatile week with gains.

U.S. crude (CLc1) was down 0.5 percent at $45.83 a barrel, but was up nearly 3 percent for the week and 1.6 for the month, while Brent (LCOc1) slipped about 0.2 percent to $48.69, up 1.4 percent for the week and 0.6 percent for October.

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