Asian equities slipped on Tuesday, hovering close to a near one-year low, as manufacturing activity data from China disappointed while the yen weakened past 150 per dollar after the Bank of Japan tweaked its bond yield control policy.

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The yen fell 0.7 per cent against the dollar to touch a session low of 150.12 after the central bank maintained its target for the 10-year government bond yield around 0 per cent set under its yield curve control (YCC) but redefined 1.0 per cent as a loose "upper bound" rather than a rigid cap.

Under criticism that its heavy defence of the cap is causing market distortions and an unwelcome yen fall, BOJ had raised its de-facto ceiling for the yield to 1.0 per cent from 0.5 per cent in July.

Saxo market strategist Charu Chanana said the new reference range suggests the BOJ will allow yields to rise above 1 per cent, while still trying to keep the changes to policy very subdued.

"Speculation of an eventual removal of YCC will continue to build ... last week proved that dollar/yen at 150 is not a line in the sand, and this could bring a test of 152," Chanana said.

The 10-year JGB had yet to trade following the announcement. The yield jumped 6.5 basis points earlier in the day to 0.955 per cent, its highest since May 2013.

A report from the Nikkei newspaper on Monday that said BOJ is considering adjusting its yield curve control policy helped push the yen to a two-week peak of 148.81 per dollar but the fragile currency gave up all its gains after the BOJ decision.

The central bank, which maintained its ultra-loose monetary policy, also removed a pledge to defend the 1 per cent level with offers to buy unlimited amount of bonds.

"(The) BOJ will buy some bonds around that (1 per cent) level but not unlimited and they’ve shown their hand," said Tom Nash, portfolio manager at UBS Asset Management in Sydney.

"Through all the linguistic contortions, the fact is that they are dismantling YCC. A yield cap isn’t a yield cap if you change it every time the market gets close."

CHINA DATA SPOOKS MARKETS

Stocks in Asia fell, with MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) 0.86 per cent lower, hovering close to the one-year low it touched last week.

The Shanghai Composite Index (.SSEC) was 0.38 per cent lower, while Hong Kong's Hang Seng Index (.HSI) fell 1.77 per cent after China's manufacturing activity unexpectedly returned to contraction in October, an official factory survey showed on Tuesday.

The data cast a cloud over recent indicators that showed a nascent recovery in the world's second-largest economy.

Investor focus this week will mainly be on the major central bank meetings, with the U.S. Federal Reserve and Bank of England also due to meet along with BOJ.

On Tuesday, the Federal Open Markets Committee (FOMC) will convene for a two-day monetary policy meeting, which is expected to culminate in a decision to let the Fed funds target rate stand at 5.25 per cent-5.50 per cent.

A slew of recent data showed the U.S. economy remains resilient and comments from Fed Chair Jerome Powell will be scrutinized to gauge how long interest rates are likely to stay elevated.

The Treasury Department said on Monday it expects to borrow $76 billion less this quarter than anticipated in the third quarter on expectations of higher revenue receipts.

The yield on 10-year Treasury notes was flat at 4.875 per cent.

The dollar index , which measures U.S. currency against six rivals, rose 0.226 per cent. Sterling was last trading at $1.2145, down 0.18 per cent on the day, while the euro was down 0.2 per cent at $1.0594.

U.S. crude rose 0.36 per cent to $82.61 per barrel and Brent was at $87.81, up 0.41 per cent on the day.

Gold prices were flat after slipping below the $2,000/ounce milestone in the last session. Spot gold eased 0.2 per cent to $1,991.39.