Bank of Japan's Policy Meeting and China LPR in Focus as Rally Fades

Asian markets begin the last full trading week of 2023 with a fading risk appetite following the U.S. Federal Reserve-fueled surge from last week. Investors are now focusing on the Bank of Japan's policy decision on Tuesday, along with rate decisions from the People's Bank of China and Bank Indonesia, Reserve Bank of Australia meeting minutes, and Japanese consumer price inflation. While the MSCI Asia ex-Japan index had its best week since July, the MSCI World index has been on a seven-week winning streak. Interest rate futures markets are pricing in rate cuts from the Fed next year, but the recent slide in bond yields and the dollar could continue to support risk assets. However, with the holiday season approaching, investors may be tempted to reduce exposure and take profit. The BOJ decision and guidance on Tuesday will be closely watched, with expectations that the BOJ may start dismantling ultra-loose conditions in January.