Jan 7 (Reuters) - A look at the day ahead in Asian

markets.

Risk appetite in Asia should get a lift on Tuesday, as the

feel-good factor sparked the previous day by a report that U.S.

President-elect Donald Trump's tariff agenda won't be as

aggressive as feared continues to ripple through world markets.

Trump denied the Washington Post story, but investors seem

to want to believe it - European and world equities rallied on

Monday, U.S. stocks rose for a second day, and the dollar fell

against developed and emerging currencies alike.

If U.S. tariffs are broadly lower than Trump promised on the

campaign trail and aimed only at "critical" sectors, then the

outlook for global growth should improve and the dollar should

weaken.

On the face of it, this is bullish for Asian and emerging

markets. But if Trump is true to his pre-election word and

'Truth Social' media post on Monday, risky assets will come back

under pressure.

Wall Street's gains melted a bit as Monday's session

progressed and Trump's denial kept Treasury yields elevated

ahead of this week's debt auctions. The 30-year yield is the

highest in over a year and closing in on 5.00%.

That will give investors grounds for caution on Tuesday. In

addition, political uncertainty persists in South Korea and is

flaring up in Canada too following Prime Minister Justin

Trudeau's announcement on Monday that he will step down.

In Asia, developments in Japanese markets bear monitoring,

with yields hitting multi-year highs after Bank of Japan

Governor Kazuo Ueda signaled interest rates will be raised

again, but the yen still anchored near 160.00 per dollar.

The 10-year Japanese Government Bond yield on Monday hit

1.1350%, the highest since July 2011. Japan's finance ministry

will auction 10-year bonds on Tuesday, and recently said it will

raise the amount of five-year bonds to be sold early in the new

fiscal year.

Japanese stocks, which last week touched their highest level

since July last year, are feeling the heat from higher JGB

yields. The Nikkei 225 index fell 1.5% on Monday, the biggest

fall since Nov. 13.

Will Japanese stocks on Tuesday take their cue from the

weak, export-friendly yen, or the multi-year peak in long-dated

borrowing costs?

Investors in China will focus their attention once again on

the two-year bond yield's flirtation with 1%, the weakening

exchange rate, and Beijing's efforts to support the currency and

stock markets in the face of slumping yields and persistent

deflationary pressures.

The spot yuan is now through 7.33 per dollar for the first

time since September 2023, getting closer to a break below 7.35

per dollar which would signal a new 17-year low.

Asia's economic calendar on Tuesday is light. The main

releases will be inflation data from the Philippines and Taiwan,

and China's latest FX reserves.

Here are key developments that could provide more direction

to markets on Tuesday:

- Japan 10-year bond auction

- China FX reserves (December)

- Taiwan inflation (December)