Tokyo financial district representing rising Asian stock markets ahead of the Bank of Japan rate decision /AI

Asian Stocks Rise as Oil Retreat Eases Inflation Fears; BOJ in Focus

📖 Reading time: 7 min

Asian equities advanced on Friday as lower oil prices helped ease inflation concerns, while a technology-led rebound on Wall Street supported sentiment ahead of the Bank of Japan’s interest-rate decision.

The stronger tone followed gains in U.S. markets overnight. The Nasdaq Composite jumped 1.7%, the S&P 500 rose 1.1% and the Dow gained 0.6%, as technology shares recovered after the Federal Reserve’s rate increase and falling oil prices reduced some of the pressure on bond markets.

The Philadelphia Semiconductor Index climbed 3.14%, helping lift Asian chipmakers. However, U.S. equity futures were slightly weaker during Asian trading, with Nasdaq 100 Futures down 0.2% and S&P 500 Futures slipping 0.1%.

Summary

Asian stock markets moved mostly higher as declining crude prices reduced concerns that energy costs could add further inflation pressure. The MSCI Asia Pacific index gained about 0.5%, with South Korea and Japan among the stronger performers.

Technology and semiconductor shares led much of the rebound after a strong overnight move in U.S. chip stocks. At the same time, investors remained focused on the Bank of Japan, where markets were expecting another interest-rate increase.

Brent crude fell for a third consecutive session, while U.S. Treasury yields also eased. Together, the moves provided some relief for equity valuations after a volatile week driven by energy prices, interest rates and renewed debate around AI-related stocks.

Market snapshot

Market / asset	Move
MSCI Asia Pacific	+0.5%
KOSPI	+2.1%
Nikkei 225	+0.9%
Hang Seng	+0.7%
CSI 300	+0.6%
Brent crude	-1.2% to $103.56
U.S. 10-year Treasury yield	4.93%
Philadelphia Semiconductor Index	+3.14%

Falling oil prices ease pressure on bonds

The retreat in crude prices continued to provide some relief to bond markets. Brent crude fell 1.2% to $103.56 per barrel, extending losses for a third straight session.

Meanwhile, the U.S. 10-year Treasury yield fell nine basis points overnight to 4.93% after reaching 5.02% on Wednesday. Lower energy prices can reduce some inflation concerns, while softer bond yields typically provide support for equity valuations, particularly in technology and other growth-sensitive sectors.

Middle East supply risks nevertheless remain significant. Saudi Arabia is working to restore around half of the capacity of its East-West pipeline within days after damage caused by a drone attack, while China has reportedly asked Iran to help restrain Yemen’s Iran-backed Houthi movement.

Any easing of tensions around the Bab el-Mandeb Strait could reduce disruption along another important route for global energy and trade. However, the geopolitical backdrop means oil prices are likely to remain an important driver of inflation expectations and market sentiment.

Asian chip stocks lead the rebound

The MSCI Asia Pacific index rose around 0.5%, while South Korea’s KOSPI gained 2.1% and Japan’s Nikkei 225 advanced 0.9%. Hong Kong’s Hang Seng rose 0.7%, while China’s CSI 300 climbed 0.6%.

Semiconductor stocks extended Thursday’s rebound after the strong performance of U.S. chip shares. SK Hynix jumped 4.5%, while Samsung Electronics gained 2.8%.

Japan’s Kioxia rose 4.2%, Largan surged 6.2%, Murata added 1.5% and TDK gained 0.5%. Taiwan Semiconductor Manufacturing advanced 0.6%, while Foxconn moved against the trend with a 1.5% decline and Sony fell 1.9%.

AI concerns have not completely disappeared

The rebound has not erased concerns that emerged earlier in the week around the AI trade. Despite Friday’s strong advance, the KOSPI remained around 0.8% lower for the week, while the CSI 300 was down roughly 0.6%.

Japan’s Nikkei gained around 1%, but the market’s volatility during the week reflected shifting sentiment toward technology shares. Concerns surrounding calls from AI industry executives to slow development had initially weighed on semiconductor stocks before investors refocused on resilient infrastructure demand.

The episode highlights the sensitivity of Asian equity markets to changes in expectations around AI spending. South Korea, Taiwan and Japan all have large semiconductor and electronics industries, making their markets particularly exposed to changes in global technology sentiment.

Japan inflation slows ahead of BOJ decision

Japan’s core consumer inflation slowed to 1.7% in August from 1.8% in July, marking the first decline in four months. Government subsidies helped limit utility costs, providing some relief for households and potentially influencing the Bank of Japan’s policy assessment.

The inflation report arrived just before the BOJ’s interest-rate decision, with markets expecting the central bank to raise its policy rate to 1.25% from 1%. Governor Kazuo Ueda is scheduled to speak after the decision, and investors will be watching closely for guidance on the pace of any additional tightening.

The yen weakened moderately ahead of the announcement, while Japanese equities remained higher for the week. The key question for markets is therefore not only whether the BOJ raises rates, but also how Ueda characterizes the path of policy beyond the current meeting.

Mixed performance across the rest of Asia

Elsewhere, the Shanghai Composite rose 0.8%, while Singapore’s Straits Times fell 0.4%. Australia’s S&P/ASX 200 edged 0.1% higher, while New Zealand’s NZX 50 declined 0.6%.

India’s Nifty 50 futures rose 0.2%, Thailand’s SET jumped 1.3%, the Philippines’ PSEi fell 0.5% and Indonesia’s Jakarta Composite gained 0.4%.

Japan’s TOPIX slipped 0.4%, although the index remained more than 1% higher for the week. The mixed regional performance suggests that lower oil prices and technology optimism are providing support, but domestic policy and economic factors continue to influence individual markets.

What investors should watch next

The Bank of Japan decision is likely to be the most important near-term catalyst for Asian markets. A rate increase that is accompanied by a cautious message from Governor Ueda could limit market disruption, while stronger guidance toward further tightening could put renewed pressure on bonds, the yen and rate-sensitive equities.

Oil prices will also remain important. Continued declines in Brent could help reduce inflation concerns and support risk assets, while a renewed Middle East supply shock could quickly reverse that trend.

Technology sentiment is the third major factor. Semiconductor shares have recovered strongly, but the week’s volatility shows that investors remain sensitive to any sign of weaker AI infrastructure demand or changing expectations for future investment.