Asian stocks kept to a tight range on Wednesday, with Chinese markets retreating from a stimulus and technology-driven rally, while Japanese shares retained their gains after the Bank of Japan held interest rates as widely expected.

Broader Asian markets were muted tracking weak overnight signals from Wall Street, which tumbled on Tuesday after a two-day rebound from correction territory petered out. But optimism over more stimulus measures in China helped limit major losses, while Hong Kong markets were buoyed by sustained buying into major Chinese technology names.

U.S. stock index futures crept higher in Asian trade before a Federal Reserve interest rate decision later in the day, with the central bank widely expected to keep rates unchanged. 

Investors remained on guard over any more tariff action by U.S. President Donald Trump, who kept up his threats of reciprocal trade tariffs coming in early April. Focus was also on negotiations over a U.S.-brokered Russia-Ukraine peace deal.

Japan stocks upbeat as BOJ holds and flags higher inflation

Japan’s Nikkei 225 and TOPIX indexes rose 0.7% and 1%, respectively, extending strong gains from the prior session. The indexes were buoyed by sustained gains in Japan’s five biggest trading houses, after Berkshire Hathaway Inc (NYSE:BRKa) recently increased its holdings in the firms. 

The BOJ kept its benchmark interest rates unchanged at 0.5% on Wednesday, in line with market expectations.

While the central bank offered few immediate cues on future rate action, it did flag expectations for higher inflation amid rising wages and economic resilience- a scenario that could prime the BOJ for more rate hikes in the near-to-medium-term.

Expectations of bumper wage hikes are expected to keep the BOJ hawkish, with ongoing springtime wage negotiations likely to yield another year of strong growth. 

The BOJ is expected to hike rates next by as soon as May, with investors pricing in an end-2025 rate of at least 1%. 

Japanese markets largely looked past softer-than-expected trade data for February, released on Wednesday.

China, Hong Kong dip after stimulus, tech-driven rally

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes were flat, while Hong Kong’s Hang Seng index rose marginally on strength in local tech stocks.

Chinese stocks had risen sharply in recent weeks, while the Hang Seng soared to a three-year high this week as Beijing outlined more plans to boost private spending and support the economy. 

Hong Kong markets were also buoyed by buying into major Chinese tech stocks on optimism over their AI capabilities. Tech giant Xiaomi (OTC:XIACF) Corp (HK:1810) rose nearly 2% to a record high as it clocked bumper fourth-quarter earnings and hiked its electric vehicle sales target. 

Optimism over China underpinned broader Asian markets, helping them mostly avoid a weak lead-in from Wall Street. 

Australia’s ASX 200 fell slightly on Wednesday, while South Korea’s KOSPI added 0.7%, shrugging off heightened political uncertainty before a key ruling on impeached President Yoon Suk Yeol due this week.

NVIDIA Corporation (NASDAQ:NVDA) supplier SK Hynix Inc (KS:000660) rose 1% after it said it had shipped samples of an advanced memory chip to clients. 

Singapore’s Straits Times index rose 0.4%, while futures for India’s Nifty 50 index pointed to a positive open, after local markets rebounded sharply from a wave of recent losses.