Volkswacht Bodensee - Most Asian markets on recession fears, Bank of Japan in focus

All eyes are now on a Bank of Japan decision later in the day, with speculation that officials could finally begin to shift from their ultra-loose policies that have left it trailing most of its peers and sent the yen tumbling more than 13 percent this year.

Gone is the optimism that flowed through trading floors immediately after the Federal Reserve on Wednesday announced its biggest rate increase for 28 years as global finance chiefs followed suit, putting a squeeze on dealers' ability to borrow.

Markets have been tumbling for months as traders contemplate the end of the era of cheap cash that sent valuations to record or multi-year highs, with inflation at levels not seen in decades owing to a surge in energy and food prices.

The Bank of England on Thursday lifted rates for a fifth straight time to their highest since 2009 during the financial crisis, just as the Swiss central bank shocked markets by unveiling its own half-point increase -- its first rise in 15 years.

The European Central Bank has also signalled it will announce a hike soon.

Equities plunged as expectations for recession continue to rise. The Dow ended below 30,000 for the first time in more than a year and the S&P 500 is now at its lowest since December 2020.

With rates rising everywhere else, pressure is building on the Bank of Japan to move away from its policy of keeping its foot on yields.

While officials in Tokyo insist that low rates are still needed to nurture a struggling economy, there is "a building expectation that the Bank of Japan will need to amend their policy stance closer to some version of normal", said Benjamin Jeffery and Ian Lyngen, strategists at BMO Capital Markets.

Observers said traders were struggling to work out what officials will do, though there is a feeling they will make some concessions with inflation at an eight-year high as energy prices spike in the commodity-poor country.

And while the yen dipped slightly against the dollar Friday it was off the 24-year lows touched earlier in the week.

Stephen Innes at SPI Asset Management said: "No central bankers worth their weight would put inflation-fighting credentials on the line and import higher energy inflation via a weaker currency."

He added that "in what is a highly ominous signal for stock market investors, given the broader index's sensitivity to rising bond yields... the global race to hike rates is nowhere near the finishing line".

In early trade, Tokyo, Sydney, Seoul, Singapore, Wellington, Taipei, Manila and Jakarta were all in the red, though Hong Kong and Shanghai were slightly higher after steep losses on Thursday.

- Key figures at around 0230 GMT -

Tokyo - Nikkei 225: DOWN 2.2 percent at 25,858.50 (break)

Hong Kong - Hang Seng Index: UP 1.0 percent at 21,063.11

Shanghai - Composite: UP 0.5 percent at 3,300.72

Dollar/yen: UP at 133.37 yen from 132.14 yen late Thursday

Euro/dollar: DOWN at $1.0532 from $1.0550

Pound/dollar: DOWN at $1.2320 from $1.2350

Euro/pound: UP at 85.48 pence from 85.40 pence

West Texas Intermediate: DOWN 0.5 percent at $116.96

Brent North Sea crude: DOWN 0.5 percent at $119.24 per barrel

New York - Dow: DOWN 2.4 percent at 29,927.07 (close)

London - FTSE 100: DOWN 3.1 percent at 7,044.98 (close)

-- Bloomberg News contributed to this story --

M.Odermatt--BTB