Hong Kong - Asian stocks retreated on Tuesday, with Tokyo sinking after the Bank of Japan (BoJ) held fire on fresh monetary stimulus, while energy companies slid following a drop in oil prices.
The Japanese central bank kept its record monetary stimulus unchanged, as policy makers digested the impact of the negative interest rates announced in January.
The decision was widely expected, although analysts predict Governor Haruhiko Kuroda and his team will unleash more monetary firepower in the coming months to kick-start Japan's weak economy.
Tokyo shares were trading down 0.91% after the announcement, while the yen strengthened against its major peers.
"The BoJ will keep a wait-and-see stance for a while," Yasuhide Yajima, chief economist at NLI Research Institute, told Bloomberg News.
"I expect further easing in July, when prices data will clearly show they're off target."
Investors were closely watching the BoJ at a time when concerns have been mounting that central banks are running out of ammunition to boost the sagging world economy.
Last week the European Central Bank (ECB) unveiled dramatic new stimulus measures, while US Federal Reserve officials kick off a meeting later Tuesday that will be closely watched for clues on whether it will delay raising interest rates.
Financial markets have staged a comeback from their worst start to the year in living memory, but investors are still nervous about signs of weak global growth - particularly in number two economy China.
Chinese stocks fell on Tuesday, as news the central bank fixed the yuan currency lower against the US dollar heightened concerns after a raft of poor economic data released over the weekend.
Shanghai slid 1.13% by the break, while Hong Kong dropped 0.72%.
Sydney shares also fell more than one percent, hit by a slump in energy companies after oil prices stumbled, while commodity currencies like the Australian dollar and Malaysian ringgit weakened.
Energy shares across Asia took a battering as crude prices extended heavy losses from the previous session, with hopes fading that major producers would stop pumping in a bid to dampen a glut of global supplies.
US oil benchmark WTI was down 24 cents to $36.94 a barrel and Brent crude lost 32c to $39.21, after briefly breaking above $40 a barrel for the first time this year last week.
In shares, Australia's Sundance Energy collapsed almost 17%, while CNOOC lost 2.64% and Sinopec dropped 2.25% in Hong Kong.
Russia on Monday said a meeting to discuss an output freeze had been pushed back to next month, while news Iran will not temper its production until it reaches four million barrels per day (bpd) weighed on crude.
The Organisation of the Petroleum Exporting Countries (OPEC) estimated Iran pumped out 3.1 million bpd of crude in February, up from 2.9 million in January.
Evan Lucas, a market strategist at IG Markets in Sydney, predicted oil prices will average around $35 a barrel in the second-quarter.
"The rebalance appears to be partly based on the view that Chinese demand and OPEC freezes will rebalance the supply/demand equation," he said.
"However, that is clearly not the case and market saturation is more likely capping the price in the short-term."