Asian shares turn lower on guarded Fed

Asian shares turned lower on Thursday after the US Federal Reserve cut interest rates as expected but signaled a higher bar to further policy easings.

Treasury yields rose broadly and the curve flattened as Fed Chairman Jerome Powell took a cautious approach to any further reductions in borrowing costs, while division among central bankers has increased uncertainty over how much further rates might fall.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.36 percent. Hong Kong shares shed 0.96 percent, but Japan's Nikkei rose 1.01 percent.

The yen rose from a seven-week low versus the dollar and held onto those gains after the Bank of Japan kept policy on hold, as expected, but signaled it could ease next month.

Central banks around the world have been loosening policy to counter the risks of low inflation and recession. Easier monetary policy has generally supported equities.

However, some analysts argue that a bond market rally has gone too far, saying yields have fallen too fast and curves flattened too much. Others are worried about the growing amount of sovereign debt with negative yields.

"This is a small positive for share prices as long as there is no recession," said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors in Sydney.

"The only problem is a 25 basis-point cut was already expected, and the comments and dot-plot forecasts were not as dovish as the market hoped. I think the Fed will have to cut again. There are still some risks from the yield curve."

US stock futures fell 0.23 percent in Asia on Thursday. The S&P 500 reversed losses to end 0.03 percent higher after Powell said he did not see an imminent recession or think the Fed will adopt negative rates.

The Fed cut interest rates for a second time this year to 1.75 percent - 2.00 percent in a 7-3 vote but signaled further cuts are unlikely as the labor market remains strong.

The rate cut was widely expected, but the split vote has raised some concern about predicting the future path of monetary policy.