TOKYO / RankWire.AI / – Japanese stocks came under sharp pressure Monday as the Nikkei 225 dropped nearly 2% in early trading. The benchmark fell 1.97% to 65,096.63 and later touched an intraday low of 64,832.10. Technology shares led much of the decline as investors reacted to higher bond yields and tighter interest rate expectations. The broader Topix also weakened early, falling 0.84% to 4,111.71. Japanese government bond yields rose at the same time, adding pressure to rate sensitive parts of the equity market.
Tokyo markets track higher bond yields, yen moves and renewed pressure on the Nikkei 225. (AI-generated image)
The morning selloff eased substantially before the closing bell. The Nikkei ended Monday at 66,311.93, down 93.63 points, or 0.14%, after recovering from its lowest level of the session. The Topix finished at 4,156.29, gaining 0.23% and reversing its earlier decline. Market breadth also improved during the day. Among Nikkei constituents, 131 stocks advanced, 91 declined and three ended unchanged. The final figures showed a much smaller loss than the steep fall recorded shortly after trading began.
Japan’s government bond market remained a major focus for investors. The benchmark 10-year yield climbed to 2.95% on Monday, reaching its highest level since 1996. The two-year yield rose to 1.73%, its highest point since April 1995. Short-term bond yields often move closely with expectations for central bank policy. Rising yields also mean falling bond prices. The moves came as markets increased their expectations for higher interest rates in both Japan and the United States.
Japanese bond yields climb to multi-decade peaks
Technology stocks absorbed much of the early selling after weakness in U.S. semiconductor shares at the end of the previous week. The Nikkei’s price-weighted structure gives several large technology companies a strong influence on daily index moves. Other sectors performed better as the session progressed, helping the benchmark recover. Bank shares held up more strongly as domestic yields increased. The Topix also outperformed the Nikkei by the close, reflecting broader support outside the largest technology names.
Japanese shares faced renewed pressure Tuesday, when the Nikkei fell about 1% to 65,646.57 during the session. Semiconductor-related stocks again ranked among the weakest areas of the market. Global bond yields and energy prices also remained elevated. Brent crude traded above $91 a barrel amid renewed Middle East fighting. The yen stayed near 160 per dollar, keeping currency movements in focus. Japan imports most of its crude oil, making changes in global energy prices important for domestic costs and inflation.
Interest rates stay in focus for Tokyo markets
The Bank of Japan kept its short-term policy rate near 1% after raising it in June and leaving it unchanged in July. Its next scheduled monetary policy meeting will take place on September 17 and 18. The Federal Reserve also kept inflation at the center of its latest policy message. Comments from its chair on August 28 emphasized that U.S. inflation remained above the central bank’s 2% target. Market expectations for higher borrowing costs strengthened after those remarks, while Japanese yields stayed near three-decade highs.
Monday’s closing data showed that the Nikkei’s early 1.97% decline did not last through the full trading session. The benchmark recovered most of that loss and finished only 0.14% lower, while the Topix closed higher. Tuesday then brought another decline as chip shares weakened and bond yields remained elevated. The two sessions highlighted large swings across Japanese stocks, government debt and the yen. Interest rates, inflation, energy prices and currency movements remained key factors shaping trading in Tokyo as September began.