Japan’s Nikkei Falls as Bond Yield Spike Sinks Tech, Property Shares (Update 1)

Yomiuri Shimbun file photo
Tokyo Stock Exchange

TOKYO (Reuters) – Japan’s Nikkei share average fell on Thursday as a sharp spike in bond yields weighed on tech and real estate shares, but escaped deeper losses as a rally for banks, which benefit from higher borrowing costs, picked up pace.

The Nikkei closed down 0.35% to 39,442.63. The index dipped as low as 39,065.31 earlier, threatening to break below the psychological 39,000-line for the first time since the end of last week.

The broader Topix flipped from losses to gains, ending the day up 0.15% as a 0.42% rise for value shares eclipsed a 0.13% fall in growth shares.

The Nikkei remains up almost 18% this year, and hit an all-time high of 41,087.75 on March 22.

“Japanese equities have been a target of profit-taking by overseas investors,” said Shoki Omori, chief Japan desk strategist at Mizuho Securities.

“There’s room to fall in the longer run,” potentially to 37,500, Omori added.

The benchmark 10-year Japanese government bond yield climbed to a five-month high of 0.855%, tracking a surge in equivalent U.S. yields after heated consumer inflation data knocked back bets on when the Federal Reserve will begin cutting interest rates.

Chip-making equipment giant Tokyo Electron lost 0.94%, making it the biggest drag on the Nikkei in terms of index points. Smaller peer Screen Holdings slid more than 2%.

Japan’s 7-Eleven operator Seven & i Holdings was the biggest percentage decliner, slumping 4.8% after revealing it is considering listing its superstore business.

Mitsui Fudosan sank more than 4% to be Nikkei’s worst-performing property stock.

Real estate led losers among the Tokyo Stock Exchange’s 33 industry groups, dropping 2.2%.

In contrast, banks climbed 2.1% to round out the top four, with energy shares occupying the top three spots following an overnight rise in crude oil prices.

Mining rallied 3.7%, oil and coal jumped 2.5%, and electric and gas advanced 2.4%.