Japan’s Nikkei Ends at One-Month Low as Wall Street, Higher Yields Weigh (UPDATE 1)

Yomiuri Shimbun file photo
Tokyo Stock Exchange

TOKYO (Reuters) – Japan’s Nikkei share average ended lower for a third consecutive session on Thursday, tracking the headwind from a slump on Wall Street while a spike in global yields also dampened sentiment.

The Nikkei finished 1.3% lower at 38,054.13, its lowest closing level since April 26. Earlier in the session, the index dropped as much as 2.4% to 37,617.00.

The broader Topix slipped about 0.6% to 2,726.20.

Weighing on the market was the overnight dip in U.S. stocks as Treasury yields rose to four-week highs amid concerns continued over the timing and scale of possible U.S. interest rate cuts.

Meanwhile, the 10-year Japanese government bond (JGB) yield hit its highest level since July 2011 at 1.1% as investors bet on another rate hike in Japan as soon as July and remained wary about the tapering of the central bank’s bond purchases.

While low compared with their U.S. peers, higher JGB yields still had a significant impact on market sentiment, said Hiroshi Namioka, chief strategist at T&D Asset Management.

“It’s a bit of a psychological shock for market players who haven’t seen yields rise like this until now, or rather, who have become numb as easy monetary policy continued for such a long time.”

Technical reasons such as end-of-the-month portfolio rebalancing also contributed to the Nikkei’s steep decline, he said.

Top technology shares, which rising yields tend to weigh on as higher rates make borrowing more expensive, were among some of the biggest drags in the index.

Among chip-related stocks, Advantest fell 6.1% to become the worst percentage performer of the day, while Tokyo Electron dropped 2.5%. Together the big-name shares swiped about 177 index points off the Nikkei.

AI-focused startup investor SoftBank Group slipped 2.3%.

Among other heavyweight shares, Uniqlo parent firm Fast Retailing declined 2.1% and Toyota Motor slumped 1.8%.