Long-term interest rates rose into the 3% range in early September, while the yen moved into the ¥160 range per dollar. Emin Yurumazu attributed this to increased AI investment and rising government debt, suggesting that the Nikkei 225 could remain in the ¥60,000 range through year-end.
In early September, Japan’s long-term interest rates temporarily rose into the 3% range, with the 10-year government bond yield reaching that level, while the exchange rate moved back to around ¥160 per dollar. The view was expressed that this had caused the Nikkei 225 to fall sharply, and market developments remain a focus of attention.
Factors cited for the rise in long-term interest rates included expectations that inflation will remain elevated, supply concerns surrounding the Strait of Hormuz, and disruptions to the distribution of energy and fertilizer feedstocks. As a result, government bond yields rose in countries around the world, while concerns about an outflow of funds from equity markets also spread.
The AI boom was cited as a third factor. Hyperscalers such as Microsoft are accelerating investment in AI infrastructure, while rising data center demand and expectations of a bottoming out in semiconductor demand are adding to inflationary pressures. However, a shortage of funding for AI investment has also been highlighted, leading to increased bond issuance.
Finally, political events such as the US midterm elections could also affect markets. The current market expectation that it would be “a good result” if the Nikkei 225 could remain in the ¥60,000 range through year-end is viewed as overly optimistic.