Asian Stock Market: Trades in positive territory, China’s stimulus plan, Japan’s policy tweak

• Asian stock markets start the new week on a positive note.
• The signal of additional Chinese support bolstered risk improvement in the markets.
• Investors still assess the Bank of Japan's (BoJ) policy to lift the cap on bond yields and its ultra-easy monetary policies.

Asian stock markets trade in positive territory on Monday. Markets turn to a risk-on mood in the busy week of economic data releases, central bank meetings, and an optimistic view of the additional stimulus plan from China. At press time, the Nikkei rises 1.11%, Shanghai gains 0.63%, Hang Sang rises 1.47%, the Kospi Index is up 0.67%, and the Nifty50 rises 0.01%.

In China, the signal of additional Chinese support to stimulate domestic consumption amid a sluggish post-COVID recovery triggers risk improvement broadly. The State Council Information Office of China announced that Li Chunlin, vice chairman of the National Development and Reform Commission, along with officials from the Ministry of Industry and Information Technology, the Ministry of Commerce, and the State Administration of Market Regulation, will hold a press conference at 7:00 a.m. GMT to announce additional measures to boost consumption.

About the data, the National Bureau of Statistics (NBS) reported on Monday that the Manufacturing Purchasing Managers' Index (PMI) increased to 49.3 in July, improving from 49.0 in June and the market's estimate of 49.2. However, the figure was marked below 50 for the fourth straight month, indicating the contraction zone. Meanwhile, the NBS Services PMI fell from 53.2 in June to 51.5 in July.

In Japan, investors still assess the Bank of Japan's (BoJ) monetary policy decision to lift the cap on bond yields and the possible adjustment to its ultra-easy monetary policies.

On Friday, the BoJ maintained its ultra-low interest rates and kept its short-term interest rates at -0.1% while keeping its 10-year JGB yield target around 0%. Also, the central bank is allowed to make its yield curve control policy more flexible by moving 0.5% around the 0% target.

Japanese Chief Cabinet Hirokazu Matsuno stated that the BoJ's decision will make YCC more flexible and improve the sustainability of easy monetary policy. BoJ Governor Kazuo Ueda also reiterated that he would likely maintain ultra-loose policy to sustainably achieve the 2% inflation target. BoJ officials added that central banks prefer to examine more data before adjusting monetary policy.

Looking forward, market participants will keep an eye on the developments regarding the Chinese additional stimulus plan, a decision to implement Japan's highest minimum wage increase in history, and the update about the BoJ’s monetary policy. Later this week, investors will turn their attention to Nonfarm Payrolls data. This data might influence the USD dynamic and hint at a sooner end to the rate hike cycle. This, in turn, underpins riskier assets like Gold, equities, the AUDUSD, etc.