Asian markets were broadly higher on Thursday, as signs of slowing U.S. inflation bolstered market expectations for a Fed rate cut, while a series of positive regional economic data also boosted sentiment.

Among them, the Japanese and Chinese markets were the brightest performers. Data showed that Japan's gross domestic product (GDP) grew at a faster-than-expected pace in the second quarter, while China's retail spending also rose in July.

The three major U.S. stock indices touched two-week highs after weaker-than-expected consumer price index (CPI) inflation data, providing positive guidance for Asian markets. Meanwhile, U.S. stock index futures edged higher in the Asian trading session as softer inflation data further reinforced market expectations that the Federal Reserve will cut interest rates in September.

Japanese Markets Strengthen on Exceeding GDP Growth Estimates

Japan's Nikkei 225 and the TSE (TOPIX) are both up about 0.9%, near two-week highs.

According to the latest GDP data, Japan's economy grew at a faster-than-expected pace in the second quarter, thanks to a recovery in private consumption. Significant pay raises successfully fought for by Japan's labor unions earlier this year are gradually showing results across the country, boosting consumption growth.

This positive GDP figure signals an improved outlook for the Japanese economy, especially after the sharp decline in the first quarter. The data is also in line with the Bank of Japan's (BOJ) forecast that wage increases will boost consumption in the coming months, thereby boosting domestic GDP growth and benefiting local businesses.

However, healthy economic growth also provides more room for the BOJ to raise interest rates further, especially if inflation rises. This trend could limit the overall gains in the Japanese market.

China Market Rises on Positive Retail Sales Data

China's Shanghai Composite and CSI 300 indices both rose more than 1% after statistics showed that China's retail sales grew at a faster-than-expected pace in July.

Hong Kong's Hang Seng Index rose 0.6%. A drop in Tencent Holdings prevented further gains in the Hang Seng despite the stock reporting second-quarter earnings growth.

Positive retail sales data allowed investors to overlook weaker-than-expected data on industrial production and fixed asset investment, while China's unemployment rate unexpectedly rose to 4.2%.

Market sentiment will be tested again on Thursday, when e-commerce giants Alibaba Group and Jingdong Group announce their quarterly earnings.

In addition, South Korean and Indian markets are closed for holidays.