Asian stocks were mostly down on Thursday following a weak lead from Wall Street, though better-than-expected manufacturing data from China provided a glimmer of good news for Beijing. The three main US stock indices lost ground on Wednesday, and Asian investors appeared to be in a risk-averse mood ahead of a coin-toss US election and after a widely expected decision by the Bank of Japan to leave its main interest rate unchanged. Tokyo fell by half a percent, weighed down by a stronger yen and a drop in stocks linked to the semiconductor industry, which also dipped on Wall Street.
The Bank of Japan said in an outlook report accompanying its rate announcement that there were "high uncertainties surrounding Japan's economic activities and prices". Its decision to stand pat came after an election that saw the ruling coalition lose its majority in the lower house for the first time since 2009. Businesses and economists worry that Prime Minister Shigeru Ishiba will offer tax cuts and higher spending, and go slow on reforms needed to improve Japan's competitiveness as he seeks to court support from other parties.
There are also concerns that the government may pressure the BoJ to take a break from its gradual normalisation of its ultra-loose monetary policy, even if it leads to a weaker yen. The bank raised borrowing costs in March for the first time since 2007, and did so again in July. It signalled Thursday that it would raise rates yet again if inflation developed as it expected.