HONG KONG: Asian markets were mostly lower on Thursday after Barack Obama challenged Republicans to accept tax hikes for the rich as part of a deal to avert a fiscal cliff.

Japan’s Nikkei surged thanks to a weakening yen after the leader of the country’s opposition vowed unlimited monetary easing to kickstart the economy if, as expected, he wins a general election slated for next month.

A close eye was also being kept on Beijing, where China unveiled its leaders for the next 10 years, with investors hoping for some clarity on future policy in the world’s number two economy.

Sydney shed 0.89 per cent, or 39.2 points, to 4,349.2, and Seoul slumped 1.23 per cent, or 23.32 points, to 1,870.72.

But Tokyo climbed 1.90 per cent, or 164.99 points, to 8,829.72.

Hong Kong fell 1.55 per cent, or 333.06 points, to 21,108.93, while Shanghai lost 1.22 per cent, or 25.13 points, at 2,030.29, as investors bet the new-look Chinese leadership unveiled earlier in the day was unlikely to embark on any economy-boosting measures any time soon.

Obama, in his first news conference since re-election, on Wednesday laid out his terms for a deal on avoiding the fiscal cliff of tax hikes and spending cuts that are due on January 1 and could tip the US back into recession.

He said he wanted to extend tax cuts for 98 per cent of Americans but insisted any agreement could not include breaks for the wealthiest two per cent, a position most Republicans have rejected.

Wall Street reacted negatively on fears the president’s position could spell out a long, bloody battle between the bitterly divided Republicans and Democrats that could end with no compromise. The Dow tumbled 1.45 per cent to its lowest close since June 26, while the S&P 500 lost 1.39 per cent and the Nasdaq fell 1.29 per cent.

However dealers welcomed confirmation by the ruling party of Japanese Prime Minister Yoshihiko Noda of a national poll on December 16, bringing an end to months of speculation.

The election is expected to be won by the Liberal Democratic Party, whose leader Shinzo Abe - a former prime minister - on Thursday said he would seek more control of the central bank and push for unlimited monetary easing to spur the economy and lift inflation to 2-3 per cent.

“Only by implementing unlimited easing to achieve this target will the market show reaction,” Abe said.

An equity trading director at a foreign brokerage told Dow Jones Newswires: “A potential LDP return to power may bode well for a slew of industries, including nuclear power, consumer finance and others, in light of business-friendly comments already made regarding taxes and regulations.” On forex markets the dollar and euro added to gains made in New York on Wednesday.

In the afternoon the euro was at 102.94 yen and the dollar bought 80.78 yen, compared with 102.19 yen and 80.23 yen in New York. They are both well up from 101.11 yen and 79.50 yen earlier on Wednesday in Asia.

The European single currency traded at $1.2743 on Thursday, compared with $1.2734 late in New York.

In China there were few surprises as Xi Jinping was unveiled as the new head of the Communist Party and the seven-member Politburo Standing Committee, the country’s top decision-making body.

Agence France-Presse