The Nikkei 225 and KOSPI edged higher on Thursday after the Federal Reserve delivered its first interest-rate increase in more than three years, although early rallies faded as investors absorbed the prospect of further US tightening.
Japan’s Nikkei 225 was barely higher around midday after surging more than 1% at the open, while the broader Topix gained about 0.7%.
South Korea’s KOSPI followed a similar pattern, opening 0.9% higher before paring its advance to about 0.1%.
The initial relief reflected the removal of uncertainty around the Fed decision, but a stronger dollar and rising short-term US yields quickly tempered enthusiasm.
Nikkei 225 gets support from the weaker yen
Japanese equities initially welcomed the Fed’s quarter-point increase to 3.75%-4%, particularly after the dollar strengthened against the yen.
The yen weakened beyond 156 per dollar following the decision, improving the earnings outlook for Japanese exporters.
Machinery and pharmaceutical stocks were among the stronger performers, while Mitsubishi Heavy Industries gained more than 3%. SoftBank also advanced.
Technology shares were less convincing. Advantest and Tokyo Electron fell as lingering uncertainty over AI investment kept pressure on semiconductor names, helping erase much of the Nikkei’s opening gain.
Nomura Securities strategist Wataru Akiyama told the Times of India that clearing the Fed event had removed some market uncertainty, but cautioned that the breadth of Thursday’s gains did not yet point to a particularly strong Japanese equity backdrop.
KOSPI rally fades as foreign selling persists
The KOSPI climbed as high as 1.15% shortly after the open before retreating to 6,723.23, up just 0.08% by late morning.
Samsung Electronics slipped 0.39% and SK Hynix fell 0.74%, limiting the benchmark after semiconductor shares helped Korea snap a four-session losing streak on Wednesday.
Financial and defence stocks performed better, with KB Financial up 1.47% and Hanwha Aerospace gaining about 3%.
Foreign investors remained a constraint, while the won weakened to around 1,382 per dollar.
Kiwoom Securities analyst Han Ji-young told the Korea Times that Korean equities were likely to remain volatile as investors digested the Fed’s hawkish message.
That sensitivity is amplified by the KOSPI’s heavy technology weighting and its dependence on overseas capital flows.
Fed relief is partial as Asia waits for the BOJ
The Fed raised rates unanimously and signalled that another increase is likely this year.
Goldman Sachs now expects the next move in October, while markets have sharply increased bets on further tightening.
That pushed the dollar to a seven-week high, although the 10-year Treasury yield eased just below 5% after Tuesday’s surge.
Brent crude also fell towards $105 as Saudi supply concerns eased, providing some relief to energy-importing Japan and South Korea.
Elsewhere, MSCI’s Asia-Pacific index excluding Japan rose about 0.4%, while China’s CSI 300 fell 0.4% and Hong Kong’s Hang Seng dropped 0.9%. S&P 500 futures gained about 0.5% and Nasdaq futures rose 0.6%.
Attention now shifts to Friday’s Bank of Japan decision. A quarter-point hike to 1.25% is widely expected, meaning the bigger issue for the Nikkei will be Governor Kazuo Ueda’s guidance on what comes next.
Meanwhile, for KOSPI, the test is whether Fed uncertainty has genuinely cleared enough to bring foreign buyers back.
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