SINGAPORE — Shares in Asia-Pacific struggled for direction on Friday, following sharp declines on Wall Street as investors weighed the possibility of aggressive monetary policy tightening leading to a recession.
The Nikkei 225 in Japan fell 1.77% to close to 25,963 as shares of conglomerate SoftBank Group plunged 4.24% while the Topix index shed 1.71% to 1,835.90. South Korea's Kospi declined 0.43% to end the trading day at 2,440.93.
In Hong Kong, the Hang Seng index recovered from earlier losses to rise 1.15%, as of its final hour of trading. Shares of life insurer AIA climbed more than 2%.
Whereas the markets are saying that central banks have to do more to control inflation, the more the central banks do to control inflation, the more they shock the markets.David RochePresident and Global Strategist, Independent Strategy
Mainland China stocks closed higher, with the Shanghai Composite up 0.96% to 3,316.79 while the Shenzhen Component gained 1.483% to 12,331.14.
Over in Australia, the S&P/ASX 200 slipped 1.76%, closing at 6,474.80.
MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.43%.
"We still maintain our overweight view on equities versus bonds," said Suresh Tantia, senior investment strategist at the APAC chief investment office of Credit Suisse.
"You can't rule out further downside because right now markets are very volatile, they are trading on news flow and based on the expectations of Fed but at current levels, it doesn't really make sense to sell. I think once the expectations of Fed rate hikes stabilize, then we should start to see a recovery in the equity market," he said.
Shares on Wall Street fell sharply overnight, with the S&P 500 dropping 3.25% to 3,666.77. The Dow Jones Industrial Average shed 741.46 points, or 2.42%, to 29,927.07. The Nasdaq Composite lagged, falling 4.08% to 10,646.10.
Bank of Japan holds steady on policy
The Bank of Japan on Friday said it would maintain its ultra-easy monetary policy.
Following that decision, the Japanese yen weakened more than 1.5% to 134.30 per dollar, though it was still stronger as compared with levels above 135 seen against the greenback earlier this week.
The Bank of Japan had "not much choice" but to maintain status quo at a time where markets are highly volatile, said Sayuri Shirai, professor at Keio University and a former member of the central bank's policy board.
The Japanese central bank's decision stands in sharp contrast to that of its global peers. Earlier this week, the U.S. Federal Reserve, Bank of England and Swiss National Bank all raised their benchmark rates.
"The contradiction is: Whereas the markets are saying that central banks have to do more to control inflation, the more the central banks do to control inflation, the more they shock the markets. Now you're in that state at the moment," David Roche, president and global strategist at Independent Strategy, told CNBC's "Squawk Box Asia" on Friday.
Beyond concerns about tighter monetary conditions, other factors such as the disruptions caused by China's zero-Covid policy and the ongoing Russia-Ukraine war have also further contributed to an uncertain economic outlook.
Currencies and oil
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 104.474 after a recent drop from levels above 105.
The Australian dollar changed hands at $0.6979, off an earlier high of $0.7053.
Oil prices were lower in the afternoon of Asia trading hours, with international benchmark Brent crude futures down 0.17% to $119.61 per barrel. U.S. crude futures slipped 0.26% to $117.28 per barrel.
— CNBC's Abigail Ng contributed to this report.