The Nikkei 225 plunged by around ¥2,000 during trading and closed down ¥1,889.70 from the previous day. Selling reportedly spread against a backdrop of a sharp rise in long-term interest rates and worsening conditions in the Middle East.
On 2 September, the Nikkei 225 briefly fell by nearly ¥2,000 during trading on the Tokyo Stock Exchange, closing down ¥1,889.70 from the previous day at ¥64,325.64. The TOPIX also fell 100.26 points to 4,081.60, while all 33 sectors on the TSE Prime Market declined in a broad-based sell-off.
Factors cited for the sharp drop include the yield on 10-year Japanese government bonds, which reached 3% on 1 September, as well as accelerating bond selling amid expectations of a Bank of Japan rate hike, rising US interest rates and fiscal concerns. On 2 September, the yield on newly issued 10-year Japanese government bonds rose to 3.015%, bringing the 3% threshold clearly into focus. The gap between the policy rate and the long-term interest rate has widened to approximately 2 percentage points.
Higher crude oil prices, the yen's depreciation and indications that the US may raise interest rates were also factors. Brent crude remained elevated during the month amid worsening conditions in the Middle East. Japan relies on the Middle East for approximately 95% of its oil imports, much of which passes through the Strait of Hormuz. Over the longer term, views have emerged that concerns about yen appreciation and the high-interest-rate environment will weigh on the equity market.
The market-wide move was heavily influenced by technology stocks, particularly semiconductor shares. Only 1 of the most actively traded stocks by value rose, further widening disparities among individual stocks. Attention will now focus on the Bank of Japan's monetary policy meetings, developments at the US Federal Reserve, oil price trends and geopolitical risks.