* BOJ likely to ease policy, markets uncertain on steps
* Yen eases, JGBs gain, but moves muted
* Aussie firm near two-year high ahead of RBA
* Asian shares fall, led by resources stocks
By Alex Richardson
SINGAPORE, Oct 5 (Reuters) - The yen eased and Japanese
government bond futures rose to a seven-year peak on Tuesday
amid reports the Bank of Japan may unveil monetary policy
easing steps that are more aggressive than expected at its
meeting later.
Asian stock markets fell, with resource shares prominent
losers, pressured by declines in U.S. equities and in oil and
metals prices. [] [] []
The Bank of Japan policy decision, due around 0330-0500
GMT, comes as central banks in Japan, the United States and
Britain are under political pressure to do more to support
economies showing only tepid recovery from the worst recession
in decades.
"The BOJ is being pushed into a corner. It cannot ignore
government calls for action as that may prompt it to revise the
BOJ law," said Koichi Haji, chief economist at NLI Research
Institute. []
The BOJ had been expected to take modest easing measures
such as expanding its money market operations, but the Nikkei
business daily reported on Tuesday it could take more
aggressive action such as increasing its purchases of long-term
government debt.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Asian equities Q3 performance:
http://link.reuters.com/ryt26p
Yen - taking on the market:
http://r.reuters.com/fac44p
Chronology of BOJ policy moves:
[]
More stories on the Japanese economy:
[]
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Ten-year Japanese government bond futures <2JGBv1> <JGBv1>
edged up 0.02 point to 143.47, having reached a seven-year high
at 143.59 earlier. The benchmark yield <JP10YTN=JBTC> was flat
at 0.935 percent, having dipped to 0.925 percent earlier.
Traders said the reaction was muted as the market was
unconvinced the BOJ would pile into the long-term JGB market,
seeing purchases of asset-backed securities as more likely.
[]
The yen softened, although not dramatically, with the
dollar gaining around 0.3 percent against the Japanese currency
<JPY=> to around 83.60. []
Foreign exchange markets were also watching Australia's
central bank, which as due to deliver its interest rate
decision at 0330 GMT.
Expectations the Reserve Bank of Australia will raise
borrowing costs by 25 basis points to 4.75 percent kept the
Australian dollar firm near a two-year high <AUD=D4>, although
market players said a rate rise was not fully priced in.
"The Australian dollar will probably gain if the RBA raises
rates as expected," said a trader at a Japanese brokerage.
Japan's Nikkei share average <.N255> touched its lowest
level in three weeks and was flat at the mid-session break.
[]
MCSI's broadest index of Asian shares outside Japan
<.MIAPJ0000PUS> fell 0.6 percent, with its materials sub-index
<.MIAPJMT00PUS> the biggest drag, down 1.3 percent. Only the
utilities sub-index <.MIAPJUT00PUS> was in positive territory.
U.S. stocks fell on Monday as investors used middling
economic data and worries about euro zone debt as a reason to
cash in recent gains. The Dow Jones industrial average <>
fell 0.7 percent and the broader S&P 500 <.SPX> 0.8 percent.
Falling resource stocks took their toll on Australia's
benchmark index <>, which fell 0.8 percent, with mining
heavyweights BHP Billiton <BHP.AX> and Rio Tinto <RIO.AX> both
shedding more than 1.5 percent.
U.S. crude oil futures <CLc1> edged down 0.1 percent to
$81.40 a barrel after easing in the previous session due to a
stronger dollar, which also pushed down copper prices.
A stronger U.S. currency tends to weigh on
dollar-denominated commodities by making them more expensive
for holders of other currencies.
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