Asian stocks follow Wall Street's rate-cut rally higher, as BOJ stands pat

Asian stocks have surged, with Japan’s Nikkei 225 index leading gains after Wall Street romped to records following the Federal Reserve’s big cut to interest rates

Asian stocks surged on Friday with Japan’s Nikkei leading regional gains after Wall Street romped to records following the Federal Reserve’s big cut to interest rates.

U.S. futures and oil prices were lower.

The Bank of Japan ended a two-day monetary policy meeting and announced it would keep its benchmark rate unchanged at 0.25%.

In Tokyo, the Nikkei 225 index soared 2.1% to 37,935.58 after the nation's key inflation data in August accelerated for a fourth consecutive month. The core consumer price index rose 2.8% year-on-year in August, exceeding the central bank’s 2% target and leaving room for further rate hikes.

Markets are closely watching for hints on the pace of future rate hikes from BOJ Gov. Kazuo Ueda.

“For the BOJ, given current economic conditions and recent central bank rhetoric, further policy adjustments are not expected until later this year or early 2025,” Anderson Alves of ActivTrades said in a commentary.

The U.S. dollar fell to 142.32 Japanese yen from 142.62 yen. The euro rose to $1.1166 from $1.1161.

China refrained from further monetary stimulus as the central bank left key lending rates unchanged on Friday. The one-year loan prime rate (LPR), the benchmark for most corporate and household loans, stays at 3.45%, and the five-year rate, a reference for property mortgages, was held at 3.85%.

The Hang Seng in Hong Kong added 1.1% to 18,206.68 while the Shanghai Composite index fell 0.2% at 2,729.69.

Elsewhere, Australia’s S&P/ASX 200 rose 0.2% to 8,209.70. South Korea's Kospi was up 0.8% to 2,600.29.

On Thursday, the S&P 500 jumped 1.7% to 5,713.64 for one of its best days of the year and topped its last all-time high set in July. The Dow Jones Industrial Average leaped 1.3% to 42,025.19, and the Nasdaq composite led the market with a 2.5% spurt to 18,013.98.

Wall Street’s gains followed rallies for markets across Europe and Asia after the Federal Reserve delivered its first cut to interest rates in more than four years on Wednesday.

That closed the door on a run where the Fed kept its main interest rate at a two-decade high in hopes of slowing the U.S. economy enough to stamp out high inflation. Now that inflation has fallen from its peak two summers ago, Chair Jerome Powell said the Fed can focus more on keeping the job market solid and the economy out of a recession.

Wall Street’s initial reaction to Wednesday’s cut was a yawn. Markets had already run up for months on expectations for lower rates. Stocks edged lower after swinging a few times.

“Yet we come in today and have a reversal of the reversal,” said Jonathan Krinsky, chief market technician at BTIG. He said he did not anticipate such a big jump for stocks on Thursday.

The Fed is still under pressure because the job market and hiring have begun to slow under the weight of higher interest rates. Some critics say the central bank waited too long to cut rates and may have damaged the economy.

Some investment banks raised their forecasts for how much the Federal Reserve will ultimately cut interest rates, anticipating even deeper reductions than Fed officials.

The U.S. presidential election adds to uncertainties. One fear is that both the Democrats and Republicans could push for policies that add to the U.S. government’s debt, which could keep upward pressure on interest rates regardless of the Fed’s moves.

In the bond market, the yield on the 10-year Treasury held steady at 3.71%, where it was late Wednesday. The two-year Treasury yield, which more closely tracks expectations for Fed action, fell to 3.58% from 3.63%.

In other dealings, U.S. benchmark crude oil lost 20 cents to $69.68 per barrel. Brent crude, the international standard, declined 22 cents to $73.43 per barrel.

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AP Business Writer Stan Choe contributed.