A flurry of takeover activity drove Australian stocks to a record yesterday, while shares in some Japanese exporters such as Honda rose as investors bet a weaker yen would boost their profits and outlooks.

Soft consumer spending data raised more doubts about whether Japanese interest rates – the lowest in the industrialised world – would rise next month, holding the yen near four-year lows to the dollar and nudging Japanese government bond futures higher.

“I think the possibility of a February rate rise receded after last week’s CPI data and these results seem to support such thinking,” said Naomi Hasegawa, a senior fixed income strategist for Mitsubishi UFJ Securities.

The low-yielding yen has been hammered by a growing view the Bank of Japan will raise borrowing costs only gradually, while mounting signs of strength in the US economy have scaled back expectations the Federal Reserve might cut rates this year.

The US central bank is widely seen holding rates at 5.25 percent when it wraps up a two-day policy meeting on Wednesday, maintaining the dollar’s yield advantage as the eurozone’s key lending rate stands at 3.5 percent and Japan’s at 0.25 percent.

US Treasuries were flat in Asia, as investors paused to await the outcome of the Fed meeting after pushing benchmark 10-year yields to 5-1/2-month peaks. The dollar bought around 121.85 yen, not far from the peak of 122.20 yen struck the previous day, its highest since December 2002.

The euro traded around 157.95 yen just off the record 158.62 struck last week. Against the dollar, the single currency stood around $1.2962. 10-year Japanese government bond futures inched up 0.06 point to 134.41 while the benchmark 10-year yield slipped 1.5 basis points to 1.705 percent.