Japan's Nikkei slides nearly 2% following hawkish Fed comments

Japan's Nikkei share gauge experienced a notable decline of nearly 2% on Monday, driven by heightened expectations of central bank rate hikes aimed at curbing inflation. The benchmark Nikkei 225 index closed at 65,096.63 in early trading, marking a 1.97% decrease. Similarly, the broader Topix index slipped by 0.84% to 4,111.71. This downward trend follows remarks from Federal Reserve Chair Kevin Warsh, who emphasized the central bank's commitment to combating inflation, thereby amplifying expectations of an interest rate increase.

Markets have already factored in a high likelihood of the Bank of Japan raising rates during its upcoming meeting. Notably, yields on Japanese government bonds surged to fresh multi-decade highs on Monday. "Given the additional decline in US stocks last week, coupled with growing expectations of US interest rate hikes following Warsh's comments, investor sentiment is likely to be adversely affected," stated Takayuki Miyajima, a senior economist at Sony Financial Group.

Nonetheless, financial stocks might benefit from expectations of rising domestic interest rates, potentially buoying the Topix to a greater extent than the Nikkei 225. The Nikkei 225 witnessed 70 advancers against 150 decliners, with five stocks remaining unchanged. Among the most significant decliners were Advantest, which plummeted 7%, followed by Mitsubishi Materials (-6.37%) and Japan Steel Works (-5.38%).

Conversely, the most substantial percentage gainers included Kansai Electric Power (+6.22%), Tokai Carbon (+5.08%) and JTEKT (+4.10%).