By Ambar Warrick

-- Most Asian stock markets fell further on Wednesday as investors gauged the implications of a surprise policy shift by the Bank of Japan, with the Nikkei index extending its losses to an over two-month low.

The was the worst performer in Asia for a second consecutive session, losing 0.7% after a 2.5% tumble in the prior session. The BOJ within which the yields on the benchmark government bonds are allowed to fluctuate, heralding a potential pivot away from the central bank’s ultra-dovish policy.

Such a scenario would bode poorly for Japanese stock markets, which have enjoyed an accommodative environment for nearly a decade.

The prospect of a hawkish pivot by the BOJ also rattled Asian markets, which were already reeling from a series of hawkish signals from other major central banks. The , , and the all signaled last week that interest rates will keep rising in 2023.

China’s and indexes fell 0.1% and 0.3%, respectively, amid continued uncertainty over rising COVID-19 cases in the country. While analysts expect the recent relaxing of anti-COVID curbs to eventually spur an economic recovery, they warned of near-term volatility in Chinese markets as the country grapples with increasing infections.

Uncertainty over China, coupled with fears that hawkish central banks could trigger a recession in 2023, has largely dented expectations for an end-year rally in Asian stocks. Regional markets were battered by rising interest rates this year, with most bourses trading lower for 2022.

India’s and indexes fell about 0.1% each. But are among the few Asian bourses trading higher for the year, up over 6% each on strength in the Indian economy. The country is pipped as one of the fastest-growing economies in 2022, with a projected of nearly 7%.

Some Asian bourses recovered from sharp losses on Wednesday. The index added 0.5%, while led gains across Southeast Asia with a 0.7% jump.

Australia’s index surged 1.3% after sinking to an over-one-month low in the prior session.