Asian shares fell on Friday and were set to snap a three-day winning streak, while the Japanese yen was squeezed lower after the Bank of Japan held on to its dovish policy and maintained ultra-low interest rates.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was 1% lower. The index is down 3.6% for the month and 30% for the year.
As widely expected, the BOJ kept unchanged its -0.1% target for short-term interest rates, and 0% for the 10-year government bond yield by an unanimous vote.
It also maintained its dovish policy guidance that pledges to ramp up stimulus as needed, and projecting that short- and long-term interest rates will move at "current or lower levels."
BOJ raised its inflation target, saying it expects core consumer inflation to hit 2.9% in the current fiscal year ending in March 2023 and 1.6% the following year.
Earlier on Friday, core consumer inflation in Japan's capital Tokyo, considered a leading indicator of nationwide figures, hit a 33-year high of 3.4% in October, data showed on Friday. Inflation in the Tokyo area thus exceeded the central bank's 2% target for five straight months.
The BOJ policy decision comes after the European Central Bank on Thursday raised interest rates again, but said "substantial" progress had already been made in its bid to fight off a surge in inflation.
The less hawkish comments from the ECB added to expectations that central banks are likely to slow the pace of monetary tightening, especially after the Bank of Canada surprised the market by delivering a smaller-than-anticipated rate hike on Wednesday.
Rodrigo Catril, senior currency strategist at National Australia Bank, said the ECB delivered a 75 bps hike as expected, but it sounded less committal on future rate hikes.
Rates markets are cheering the idea of a potential slowdown from central banks in terms of the pace of interest rate hikes, Catril added.
Over in China, the stock market .SSEC fell 2%, with Hong Kong's Hang Seng Index .HSI down 1.7%, rounding up a rough week as investors were left reeling from Monday's brutal sell-off. Bleak industrial profit figures and widening Covid-19 outbreaks have also weighed on sentiment.
Elsewhere, Japan's Nikkei .N225 fell 0.35%, while Australia's S&P/ASX 200 index .AXJO lost 0.85%.
The BOJ's ultra-easy policy has helped trigger sharp yen JPY=EBS declines that inflate the cost of importing already expensive fuel and raw material, and this has prompted the government to intervene in the market to prop up the currency.
The Japanese yen weakened 0.18% versus the greenback at 146.53 per dollar. /FRX
The euro EUR=EBS was 0.2% to $0.9982, threatening to rise above parity again, following a more than 1% slide overnight, after the dovish tone from ECB.
The US dollar index =USD, which measures the greenback against a basket of currencies, fell 0.109%, after gaining nearly 0.8% overnight.
Meanwhile, Amazon.comAMZN.O predicted a slowdown in sales growth for the holiday season, while IntelINTC.O cut its full-year profit and revenue forecast, stoking more fears of an economic slowdown.
The downbeat results from Amazon on Thursday added to a string of dismal reports from Big Tech companies, with over $200 billion in US stock market value up in smoke in extended trade on the day.