The yen rose against both the dollar and the euro on the news, however, as traders took solace in the BoJ’s announcement that it was also raising Japan’s growth outlook on signs the economy was rebounding.
Shares in Tokyo’s benchmark Nikkei 225 index closed 0.49 percent lower, falling 85.82 points to 17,280.48. The broader Topix index of all first-section issues was down 0.50 percent, or 7.02 points, to 1,390.61.
Japan was the outlier, however, as a broad rally across Asian markets saw Hong Kong gain 1.68 percent, or 401.42 points, to 24,352.58. Shanghai rose 4.74 percent, or 150.56 points, to 3,323.61 after gaining as much as 5.17 percent in late afternoon trade.
The Shanghai increase was the index’s biggest since October 9, 2009, when it surged 4.76 percent.
Sydney closed 1.62 percent or 85.73 points higher at 5,393.4.
Seoul ended up 0.15 percent, gaining 2.92 points to finish at 1,921.23.
“The BoJ’s announcement accelerated profit-taking, which investors were already doing because of sharp gains yesterday,” Hiroaki Hiwada, a Tokyo-based strategist at Toyo Security Co., told Bloomberg News, referencing a 2.07 percent rise on the Nikkei 225 on Tuesday.
The BoJ said inflation for the year starting in April would come in at 1.0 percent, well down from an earlier 1.7 percent forecast. It said the economy would expand by 2.1 percent, up from its previous expectation of 1.5 percent.
– Inflation target –
The prices downgrade underscores how the bank’s bid to reach a 2.0 percent inflation target by early next year looks increasingly unlikely. It will fuel speculation that the BoJ will be forced to unleash further stimulus to kickstart the world’s number three economy.
Japan’s monetary policy announcement comes ahead of another much-anticipated meeting of the European Central Bank (ECB) on Thursday.
Experts broadly expect the ECB to announce a bond-buying scheme aimed at kickstarting lending in the struggling eurozone.
The improved growth outlook pushed the yen higher, to 117.88 against the dollar compared with 118.82 a day earlier. It was at 136.40 to the euro compared to 137.24.
The euro, meanwhile, fetched $1.1572 compared with $1.1550 in London.
Hong Kong and Shanghai stocks rallied, with investors in mainland China taking advantage of a sharp decline earlier in the week to snap up heavyweight financial stocks.
The Shanghai market started to recover Tuesday on better-than-expected economic growth figures and comments by the market regulator, which denied that an ongoing crackdown on margin trading aimed to “suppress” a rally that sent the Shanghai market up more than 50 percent in 2014.
On Monday the Shanghai index had tumbled 7.70 percent, its biggest fall since June 2008, after authorities last week moved to rein in risky margin trading business by punishing 12 brokerages for breaching rules.
“It looks like some new investors are taking advantage of the big decline on Monday to buy,” Wang Zheng, chief investment officer at Jingxi Investment Management Co., told Bloomberg News.
“The market over-reacted to the news of a crackdown on margin trading.”
Oil prices moved higher. The US benchmark, West Texas Intermediate for March delivery, climbed 44 cents to $46.91 while Brent crude for March rose 60 cents to $48.59.
Gold fetched $1,299.85 an ounce, against $1,291.31 late Tuesday.
In other markets:
— Taipei added 0.74 percent, or 68.02 points, to 9,319.71.
Taiwan Semiconductor Manufacturing Co. Ltd. rose 2.17 percent to Tw$141.00.
— Manila closed 0.29 percent higher, or 21.29 points, at 7,474.10.
Top-traded Metropolitan Bank and Trust Co. gained 2.42 percent to 93.10 pesos.
— Wellington rose 0.70 percent, or 39.64 points, to 5,672.85.
Fletcher Building gained 4.47 percent at NZ$8.42 while Spark was down 1.95 percent at NZ$3.275