Japanese Stocks, Bonds Fall as Oil Shock Weighs; BOJ Comments in Focus

Reuters

14:57 JST, March 19, 2026

TOKYO, March 19 (Reuters) – Japanese stocks and bonds dropped on Thursday and the yen remained fragile as investors weighed the economic impact of the prolonged Middle East conflict.

Market direction was largely unaffected by the Bank of Japan’s as-expected decision to leave its key rate unchanged, although investors will carefully parse Governor Kazuo Ueda’s press conference in the afternoon for signals of when policy may be tightened.

The blue-chip Nikkei .N225 fell 2.7% to 53,752.43 in the afternoon session, while the broader Topix .TOPX slid 1.96% to 3,644.57. The benchmark 10-year Japanese government bond yield JP10YTN=JBTC rose 4 basis points (bps) to 2.255% as the yen traded near a 20-month low against the dollar.

“Investors are seeing that the Middle East conflict will drag on, and they weigh the downward pressure on corporate earnings,” said Wataru Akiyama, a strategist at Nomura Securities.

All but two of the Tokyo Stock Exchange’s 33 industry sub-indexes dropped. The shipping .ISHIP.T and mining sectors .IMING.T rose 0.2% and 1.1%, respectively, suggesting the market is betting on a protracted conflict, Akiyama said.

Shares related to chips and artificial intelligence dragged the Nikkei lower, with Advantest 6857.T and Tokyo Electron 8035.T down 4.8% and 2.3%, respectively. SoftBank Group 9984.T lost 4.6%.

Oil prices settled higher on Wednesday and climbed further in extended trade after Iran attacked several energy facilities across the Middle East following a strike on its South Pars gas field, a major escalation in its war with the U.S. and Israel.

A surge in oil prices is weighing on Japan’s import-dependent economy -stoking inflation, raising manufacturing costs and threatening economic growth – which has added fresh uncertainty to the path for monetary policy.

“If markets see the Bank of Japan as hesitant to raise rates, yen weakness could accelerate, making foreign exchange developments a key factor in determining the timing of the next rate hike,” said Saisuke Sakai, senior economist at Mizuho Research & Technologies.

The yen JPY= was up 0.16% at 159.63 after reaching 159.905 in the previous session, the weakest point since July 2024.