Tokyo - Asian shares edged higher on Wednesday as investor appetite for riskier assets improved amid upbeat US earnings and better German investor confidence.
The yen stabilised after firming as realisation sank in that monetary easing announced on Tuesday by the Bank of Japan had fallen short of some market expectations, though many analysts acknowledged that the BoJ was showing determination to pull Japan out of years of deflation and economic stagnation.
Copper and gold were underpinned as the BoJ's move was seen supporting a global economic recovery while its 2% inflation target boosted bullion's appeal as a hedge against rising prices.
The MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.1%, hovering near Tuesday's 17-1/2-month high, after recent positive data from the United States and China improved investor sentiment.
Australian shares rose 0.3%, touching a 20-month high for a second day in a row as top miner BHP Billiton gained after lifting iron ore production.
Japan's benchmark Nikkei average fell 0.8% as the firmer yen weighed on exporters. The yen has weakened by around 12% since mid-November against the dollar, and boosted Nikkei by more than 20% as a weaker yen improved exporters' earnings outlook.
"Some investors have been waiting for the timing to take profits, as they have chased the market higher," said Hiroichi Nishi, assistant general manager at SMBC Nikko Securities.
The BoJ on Tuesday doubled its inflation target to 2% and adopted an open-ended commitment to buy assets starting 2014, sparking an unwinding of yen short positions from speculators looking for more immediate easing step.
The dollar steadied around ¥88.70 while the euro eased 0.1% to ¥118.11. The dollar hit a 2-1/2-year high of ¥90.25 on Monday.
Technically, many believe the yen will resume its recent downtrend, seeing the latest rebound in the Japanese currency as a correction to its rapid and sharp decline.
Tuesday's pullback on dollar/yen has once again held slightly above the 23.6% of the rally from 81.69 to ¥90.25 seen on Monday, which comes in at ¥88.25, some analysts note. They say the dollar's inability to break below minimum retracement levels since the rally from a December 4 low around ¥81.70 highlights the strength of the dollar/yen's upward move.
With BoJ joining the continued push by global central banks to support growth, Morgan Stanley said in a research note that policy easing by central banks was positive for emerging markets with more bond portfolio inflows increasingly towards local markets.
"Our key themes for 2013 are rebalancing and reflation, with both prevalent so far this year. Even given a migration towards global equities and away from fixed income, emerging market fixed income remains well-placed," it said.
On Tuesday, hopes of an improvement in the global economy led the Standard & Poor's 500 Index to a five-year high.
International Business Machines, the world's largest technology services company reported fourth-quarter earnings and revenue that beat estimates, while revenue from Google's core Internet business outpaced many analysts' expectations for the same quarter. Apple's earnings release was due later on Wednesday.
Investors were also cheered by easing worries over the US budget crisis and the eurozone's debt financing.
Republican leaders in the House of Representatives said they aim to pass on Wednesday a nearly four-month extension of the US debt limit to May 19.
German ZEW investor sentiment rose to its highest level in more than 2-1/2 years in January while Spain has raised around 14% of its 2013 funding target.
US crude was down 0.1% to $96.62 a barrel and Brent also eased 0.1% to $112.34.
Spot gold was at $1 692.66 an ounce, near Tuesday's one-month high of $1 695.76, while London copper traded down 0.3% at $8 107 a tonne but clinging near a one-week high of $$8 144.50 hit on Tuesday.