Asian stock markets opened with modest gains as currency movements and political developments shaped early trading sentiment. The Japanese yen's continued weakness past key levels and upcoming policy decisions dominated market attention.

Japanese Markets Lead Regional Gains

The Nikkei 225 Stock Average posted a strong 0.9% advance, extending its record-breaking run as the Japanese currency weakened significantly. The yen slipped past the 159-per-dollar level, marking its weakest position since July 2024.

The currency weakness coincided with reports of Prime Minister Sanae Takaichi's plans for a snap election, which fueled the stock rally while pushing down bonds and driving the yen deeper into intervention-risk territory. Japanese five-year yields rose to 1.615%, the highest since the tenor's 2000 debut.

Regional Market Movements

South Korean shares edged higher, maintaining their remarkable streak of posting gains on every trading day of 2026. Other regional markets showed mixed but generally positive sentiment.

US Market Pressures and Inflation Data

US markets faced headwinds during Tuesday's session, with the S&P 500 falling from an all-time high. JPMorgan Chase led a slide in banking stocks after its investment-banking fees missed guidance expectations.

December US inflation data provided mixed signals for monetary policy expectations. The core Consumer Price Index, excluding volatile food and energy categories, increased 0.2% from November and advanced 2.6% annually, matching a four-year low.

Despite the cooler inflation reading, bond traders' expectations remained unchanged regarding Federal Reserve rate cuts, with projections pointing to mid-2026 for the next reduction.

Market Outlook and Key Events

Traders are closely monitoring several upcoming developments that could influence market direction:

• Potential US Supreme Court ruling on Trump's global tariffs announced in April
• Earnings reports from major US banks including Bank of America, Wells Fargo, Citigroup, Goldman Sachs, and Morgan Stanley
• Japan's political developments following snap election reports

Commodity markets showed notable movements, with Brent crude posting its biggest four-day gain since June as Trump increased rhetoric on Iran. Silver extended its recent rally, capping its best three-day streak on record.

Currency and Commodity Snapshot

The combination of political uncertainty in Japan, upcoming US policy decisions, and corporate earnings results continues to create a complex backdrop for Asian markets as trading progresses.

Asian stock markets opened with modest gains as regional equities built on recent momentum, led by Japan's continued record-breaking performance amid currency weakness and political developments.

Japanese Markets Lead Regional Gains

The Nikkei 225 Stock Average advanced 0.9% in early trading, extending its record-breaking run as the Japanese yen continued to weaken significantly. The currency slipped past the 159-per-dollar level, reaching its weakest position since July 2024. This currency weakness has been a key driver behind the strong performance of Japanese equities, with stocks jumping amid reports of a potential snap election in the country.

South Korea Maintains Perfect 2026 Record

South Korean shares edged higher during the session, maintaining their remarkable streak of posting gains on every trading day of 2026. This consistent performance highlights the strength in regional markets and investor confidence in South Korean equities.

US Market Pressures and Federal Reserve Outlook

Tuesday's US trading session saw the S&P 500 retreat from all-time highs, with banking sector weakness leading the decline. JPMorgan Chase & Co. spearheaded a slide in lenders after its investment-banking fees missed guidance expectations. The broader market pullback came as December inflation data failed to alter expectations that the Federal Reserve will pause interest-rate cuts.

The cooler-than-expected US consumer price index reading reinforced bond traders' projections that the Fed will wait until mid-year before implementing rate cuts. Despite Fed Chair Jerome Powell and his board reducing the benchmark rate three times in the previous year, money markets continue to project the next reduction only in mid-2026.

"The initial excitement sparked by a cooler-than-anticipated core CPI was short-lived," said Jose Torres at Interactive Brokers. "The reversal was influenced, in part, by the report's failure to pull forward the next expected rate reduction from June to April, as fixed-income watchers project Powell's December cut will be his last at the helm."

Banking Sector Earnings and Market Catalysts

Following JPMorgan's disappointing results on Tuesday, the market awaits earnings from major banking rivals including Bank of America Corp., Wells Fargo & Co., Citigroup Inc., Goldman Sachs Group Inc., and Morgan Stanley, scheduled for Wednesday and Thursday. The banking group is expected to report its second-highest annual profit ever, boosted by Trump's policy changes.

Traders are also monitoring potential developments regarding a US Supreme Court ruling on tariffs that the White House has been enforcing. An adverse ruling could trigger negative market reactions, though the administration maintains alternative legal avenues for most of the levies.

Commodity Markets Show Strength

Elsewhere in global markets, Brent crude oil notched its biggest four-day gain since June as Trump intensified rhetoric regarding Iran. Silver also extended its recent rally, capping its best three-day streak on record, reflecting broader commodity strength amid geopolitical tensions and policy uncertainties.