Asian stocks remained subdued on Tuesday as market participants assessed rising geopolitical tensions and awaited clarity on global monetary policies. While the Japanese stock market rose following the Bank of Japan’s policy decision, markets across the region largely neglected Wall Street’s tech-driven rebound.

U.S.-Iran Tensions Rise, Affecting Risk Appetite

Cautious sentiment prevailed in Asian equities as former U.S. President Donald Trump called for the evacuation of Tehran, intensifying already heightened anxieties. Despite later assurances from White House officials that direct military action would not occur, ongoing airstrikes between Israel and Iran have kept investors on edge as the conflict persists.

These developments led to a 0.4% decline in S&P 500 Futures during Asian sessions, as risk aversion grew just before Wednesday’s anticipated Fed interest rate decision.

Japanese Markets Resilient Following BOJ Decision

In contrast, Japan’s markets showed strength. The Nikkei 225 witnessed a 0.6% rise, and the TOPIX index gained 0.4%, fueled by strong tech stocks and a weaker yen, which is beneficial for exporters.

The Bank of Japan decided to maintain its interest rates at 0.5% as expected and will continue its government bond purchases through 2026. However, the central bank indicated a slower tapering pace beginning April 2026, reducing bond buying by 200 billion yen per quarter.

Investors are now looking to BOJ Governor Kazuo Ueda for insights into potential inflation and monetary policy direction in light of the current economic climate.

Looking Ahead

With mounting geopolitical instability and the imminent Fed decision, global investors are anticipated to adopt a more cautious stance. While Japan offers some respite, broader Asian markets appear trapped in a wait-and-see mindset.

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