Long-term interest rates rose following a sharp upside surprise in the US jobs report, prompting a reaction in Japanese stocks. Hiroshi Miyazaki (宮嵜 浩), CIO at Nomura Fiduciary Research & Consulting, explains that “good” interest rate increases accompanying an economic recovery could encourage investment in stocks outside the AI and semiconductor sectors.
The US jobs report exceeded market expectations, prompting more active stock market movements amid growing awareness of rising US long-term interest rates. In Japan, the Nikkei Stock Average fell sharply on 8 June from the previous week’s close, reflecting the decline in US stocks. Growth stocks, including semiconductors, are susceptible to the effects of rising interest rates, but the market did not experience a broad-based sell-off.
US stocks fell on 5 June partly because the increase in employment in the May jobs report exceeded market expectations. Improving labor supply and demand intensified inflationary pressure and raised expectations that US long-term interest rates would rise. Long-term interest rates in both Japan and the US are in an upward phase, and Japan’s 10-year government bond yield was reported to have reached 2.71% as of 8 June.
The recovery in Japanese corporate earnings is less vigorous than in the US, and the view was expressed that US stocks have a relative advantage while the risk of higher crude oil prices remains elevated. Economic recoveries in both Japan and the US are behind the rise in long-term interest rates. Assuming that this is a “good” rise in interest rates, the outlook is for the stock market to remain firm as gains broaden beyond AI and semiconductor stocks.