TOKYO / RankWire.AI / – Japanese stocks ended Monday with significant losses following a sharp decline in the Nikkei 225, which fell nearly 2% during early trading. The index dropped 1.97% to close at 65,096.63, after briefly touching an intraday low of 64,832.10. The downturn was driven largely by technology shares amid rising bond yields and expectations of tighter interest rate policies. Meanwhile, the broader Topix index also saw early declines, dropping 0.84% to 4,111.71. Simultaneously, Japanese government bond yields increased, exerting additional downward pressure on rate-sensitive segments of the stock market.
The initial selloff in the morning eased considerably before the market closed. The Nikkei recovered from its session lows to finish at 66,311.93, down just 93.63 points, or 0.14%. The Topix gained 0.23% to end at 4,156.29, reversing its earlier decline. Market breadth improved over the course of the day, with 131 stocks advancing, 91 declining, and three remaining unchanged among Nikkei components. The final figures reflect a much smaller loss compared to the steep fall seen shortly after trading commenced.
Investors continued to monitor Japan’s government bond market closely. The benchmark 10-year yield rose to 2.95% on Monday, reaching its highest point since 1996. The two-year yield increased to 1.73%, marking its highest level since April 1995. Short-term bond yields tend to closely follow expectations for central bank policies. Rising yields also mean falling bond prices. These movements occurred as markets increased their expectations for higher interest rates in both Japan and the United States.
Japanese bond yields hit multi-decade peaks
Technology stocks bore the brunt of the early sell-off, partly influenced by weakness in U.S. semiconductor shares at the end of last week. The Nikkei’s price-weighted structure amplifies the influence of major technology firms on daily index performance. As the session advanced, other sectors showed resilience, helping the index recover some ground. Bank shares also remained relatively strong as domestic yields rose. By the close, the Topix outperformed the Nikkei, reflecting broader support outside the largest tech companies.
On Tuesday, Japanese stocks faced renewed downward pressure, with the Nikkei falling around 1% to 65,646.57 during trading. Semiconductor-related stocks again ranked among the weakest sectors. Elevated global bond yields and energy prices persisted. Brent crude traded above $91 a barrel amid renewed Middle East conflict. The yen hovered near 160 per dollar, keeping currency movements under focus. Since Japan imports most of its crude oil, fluctuations in energy prices directly impact domestic costs and inflation.
Markets in Tokyo remain attentive to interest rate developments
The Bank of Japan maintained its short-term policy rate near 1% after raising it in June and leaving it unchanged in July. Its upcoming monetary policy meeting is scheduled for September 17 and 18. The Federal Reserve also emphasized inflation concerns in its latest policy stance. On August 28, its chair highlighted that U.S. inflation stayed above the central bank’s 2% target. Expectations for higher borrowing costs strengthened following these comments, even as Japanese yields hovered near their highest levels in three decades.
Monday’s closing figures showed that although the Nikkei initially dropped 1.97%, it managed to recover most of that loss by the end of the trading session, finishing just 0.14% lower. Meanwhile, the Topix closed higher. Tuesday’s session, however, saw another decline driven by weak chip stocks and persistent elevated bond yields. These two days illustrated significant fluctuations across Japanese stocks, government debt, and the yen. As September begins, key factors influencing trading include interest rates, inflation, energy prices, and currency movements.