Asian shares hit 2013 lows, Nikkei volatile on BoJ jitters

Asian shares hit fresh 2013 lows and Japanese stocks had another volatile session today, extending a broad rout in global equities, as the lack of new steps from the Bank of Japan (BoJ) to quell tumult in the domestic bond market and lingering fears of a softening of US stimulus unnerved investors. European stock markets are likely to fall, with financial spreadbetters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX will open down 0.5 per cent. A 0.2 per cent rise in US stock futures, however, suggested a stable start on Wall Street.

The BoJ's move came amid mounting concern that central bank support for markets was turning more cautious, sparked by persistent speculation about the US Federal Reserve toning down its strong stimulus commitment later in the year. These concerns continued to buffet markets and led to a massive selloff in global equities and commodities overnight, although the dollar recouped some of Tuesday's sharp losses against the yen. The dollar was trading up 0.9 per cent at 96.89 yen after falling more than two per cent to a low of 95.59 yen overnight. The dollar hit a two-month low of 94.975 on Friday, having just seen a four-and-half-year peak of 103.74 yen last month.

The possibility of a shift in the Fed's current policy, even if such a move wasn't imminent, has rattled markets in recent weeks as the Fed's aggressive bond-buying plan has been a major driving force behind the recent rally in global risk assets.

"There appeared to be some heightened anxiety levels across Asian markets today as traders contemplate a world without additional economic stimulus," said Tim Waterer, senior trader at CMC Markets in Sydney.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.4 per cent to a six-and-half-month low, extending losses into the sixth straight session, the longest losing streak since March last year.

Australian shares fell 0.9 per cent to a five-month low while South Korean shares ended down 0.6 per cent. Markets in China and Hong Kong are closed for holidays.

Japan's Nikkei stock average closed down 0.2 per cent in a volatile session which saw the benchmark tumble as much as 2.4 per cent earlier. The Nikkei is down about 17 per cent from a five-and-half-year high scaled last month. The BoJ on Tuesday held off from taking additional steps to curb bond market volatility, arguing that bond markets had stabilised. BoJ Governor Haruhiko Kuroda said that the central bank will consider fresh measures if borrowing costs spike again in the future. The lack of new action, following an unprecedented bond-buying programme launched in April, disappointed some investors who were expecting the central bank to extend the maximum duration of cheap fixed-rate funds as a way to reduce volatility in the bond market.