The Nikkei fell sharply following comments from the US Fed chair, while indications that additional rate hikes were possible prompted a market reassessment. Developments surrounding the outlook for monetary policy in Japan and the US affected bond yields and sector trends in the Japanese market.
The Nikkei Stock Average fell about 2% early in the session after comments from Fed Chair Warsh (ウォーシュ), closing down 1.97% at 65,096.63. The TOPIX, meanwhile, fell 0.84% to 4,111.71, with its decline limited in comparison. The market supported rate-sensitive stocks, while selling pressure spread across export-related and growth stocks.
In the bond market, Japanese government bond yields rose, with the 2-year yield climbing to 1.730%, the 10-year yield to approximately 2.935% and the 30-year yield to 4.135%. The move was influenced by growing expectations of a rate hike at the BOJ's meeting next month.
The acceleration in the rise in Tokyo's core CPI in August was also cited as evidence supporting expectations of further BOJ tightening. ANZ forecast that a 25-bp rate hike in September, followed by additional hikes in consecutive quarters, would bring the terminal rate to 1.75%.
The outlook for Japanese and US interest rates will be the market's focus this week, and some observers said the degree to which a September BOJ policy decision is priced in could change depending on the results of government bond auctions.
Among individual stocks, Advantest posted the largest decline, falling 7%, while Japan Steel Works and Mitsubishi Materials also fell sharply. Kansai Electric Power and Tokai Carbon, meanwhile, rose.