Japanese equities, which had held up through yesterday as the TOPIX extended its winning streak to 9 sessions, opened sharply lower today and ultimately closed without fully recouping their losses. Rising long-term interest rates and higher crude oil prices have been cited as the background factors.
The TOPIX had extended its winning streak to 9 sessions through yesterday, but the Nikkei 225 opened sharply lower today and traded without fully recouping its losses. Rising crude oil prices and higher long-term interest rates are the market's main focus.
The rise in long-term interest rates reflects the economic recovery. Japan's nominal GDP has reached a new record high, while share prices have also remained at elevated levels. The Nikkei views the return of long-term interest rates to the 3% range as an economic thermometer and describes it as a sign of an economic recovery.
Higher crude oil prices and tensions in the Middle East have been cited as factors behind the rise in long-term interest rates, while WTI crude oil's move above the $90 level weighed on the market.
At the same time, some market participants believe that rising long-term interest rates and higher share prices can coexist. It has been suggested that rising government bond yields could encourage investors to favor equities as a place to invest their funds.