* Asian stocks open up, buoyed by record highs on Wall St
* Fed officials play down speculation of ending stimulus
* BOJ policy decision closely watched, yen headed higher
By Ian Chua and Vidya Ranganathan
SYDNEY, May 22 Asian stocks rose on Wednesday
following a positive lead from Wall Street with Japan's Nikkei
reaching a 5-1/2 year high, while the yen took a defensive
stance ahead of the outcome of the Bank of Japan's (BOJ) policy
MSCI's broadest index of Asia-Pacific shares outside Japan
rose 0.1 percent, reversing some of Tuesday's
0.4 percent decline. The South Korean market climbed 0.4
Tokyo's Nikkei gained 1.1 percent, breaking above
15,500 for the first time in over five years.
"The buying just doesn't stop," said Kenichi Hirano,
operating officer at Tachibana Securities.
"Today, if the Nikkei gets above 15,500, volatility could
increase, trading could become choppy, but with foreigners still
buying Japanese shares, the trend might still point upward for a
Investors took heart after two senior Federal Reserve
officials dampened market speculation that the U.S. central bank
might start tapering its stimulus programme this year.
That helped the Dow and the S&P 500 close at
new all-time highs on Tuesday.
Markets will be looking for more clues on the Fed's next
move when Chairman Ben Bernanke testifies before Congress later
His remarks will be followed by the release of minutes of
the last Fed meeting, which economists expect to give further
details of how it will eventually manage the exit from
Closer to home, the BOJ will take centre stage when it
announces its policy decision at 0330-0500 GMT. This will be
followed by a media briefing by Governor Haruhiko Kuroda.
The BOJ is expected to stand pat on monetary policy, but may
front-load bond purchases or offer funds via market operations
more frequently to help ease recent volatility in bond markets.
Caution ahead of the BOJ decision kept the yen pinned down.
The dollar, which climbed 0.2 percent against the Japanese
currency on Tuesday, held steady at 102.52.
Westpac currency strategist Sean Callow said he expected the
dollar to drop towards 100 yen over the next few days or weeks.
"Bernanke should help it on its way but we may need soft
payrolls data early June to confirm this," he said.
Callow said yen weakness was still driven heavily by
speculative positioning, and Japanese demand for foreign bonds
was still small. A stronger economy would encourage Japanese to
keep money at home and possibly plough more into the domestic
stocks, he said.
"Moreover, we view the relative success of Abenomics into
2014 as positive for yen, not negative," he said
Last month, the BOJ unleashed the world's most intense burst
of stimulus, promising to inject $1.4 trillion into the economy
in less than two years to meet its pledge of achieving 2 percent
inflation in roughly two years.
Recent economic data has been encouraging, including better
than expected export growth, and the Nikkei has soared in
response to Prime Minister Shinzo Abe's aggressive growth
strategy, termed "Abenomics". The yen has sunk 23 percent
against the dollar since mid-November.
Against a broader basket of currencies, the dollar
was down 0.1 percent at 83.79 on Wednesday, staying well off
3-year highs hit last week.
The euro rose 0.3 percent to 132.56, adding to
Tuesday's 0.4 percent gain.
Commodity markets were subdued ahead of the key central bank
events. Copper traded at $7,373.00 a tonne, while Brent
crude was a touch softer at $103.54 a barrel.
Credit markets remained on a wait-and-watch mode ahead of
Bernanke's testimony, with the Australian iTraxx index of credit
default swaps quoted at 98 basis points and some way
off last week's levels above 100.
"Market participants will be looking for any hints of
potential changes in the Federal Reserve's asset purchase
programme" Nomura analysts wrote in a note.
"With unemployment high and inflation below target, we do
not think that the FOMC is ready to scale back its
accommodation. Consequently, we do not expect the Chairman's
testimony or the minutes to signal that a change in policy is