Japanese bonds fell sharply, while a surge in crude oil and rising U.S. long-term yields weighed on the market. The Nikkei Average fell more than 3%, while the yen remained in the low ¥154 range.
According to Bloomberg, Japanese bonds fell sharply and long-term yields rose. The yield on the newly issued 10-year bond reached 2.965%, up 5.5 basis points from the previous day, while the 30-year bond yield rose to its highest level since 2007. The surge in crude oil added to the pressure, with escalating tensions in the Middle East heightening concerns about supply. The dollar's advance and movements in the yen were limited, with the yen continuing to trade in the low ¥154 range.
Crude oil surged, with Brent breaking above $109 a barrel. The rise in the Producer Price Index (PPI) also weighed on the stock market. Against the backdrop of rising U.S. long-term yields, market caution intensified and investors broadly adopted a risk-off stance. Some ultralong-term bonds attracted dip-buying, but downward pressure prevailed overall.
Equities fell sharply after reversing lower. The Nikkei Average dropped more than ¥2,000, while the TOPIX was down as much as 2.2%. AI and semiconductor-related stocks, as well as banking and machinery stocks, recorded particularly steep declines. Market participants pointed to the possibility that the Nikkei Average's decline could widen against the backdrop of losses in U.S. equities, while also expressing the view that the underlying backdrop includes solid corporate earnings and localized geopolitical risks.
The yen remained in the low ¥154 range against the dollar. Inflation concerns and rising U.S. long-term yields supported the dollar, while expectations that the Bank of Japan could accelerate the pace of interest-rate hikes restrained yen selling. The next focus is the release of the U.S. Consumer Price Index (CPI). A reading above expectations could strengthen expectations for U.S. rate hikes and potentially move dollar/yen, market participants said.