Nikkei briefly plunges 3% on higher bond yields, Middle East conflict

Tokyo stocks plunged on Wednesday as Japanese government bond yields climbed and inflation concerns intensified following renewed U.S.-Iran clashes that lifted oil prices. The Nikkei Stock Average, a measure of 225 major Japanese companies, fell 2.85 percent to close at 64,325.64, down 1,889.70 points from the previous day. The broader Topix index, encompassing about 1,000 companies, slipped 2.40 percent to 4,081.60.

Among the top-tier Prime Market, declines were primarily seen in nonferrous metal, service, and glass and ceramics sectors. The U.S. dollar weakened to around 159 yen in Tokyo, slipping nearly 1 yen as Bank of Japan policymaker Hajime Takata cautioned about the need for an early interest rate hike. All sectors suffered losses, with investor sentiment dampened by rising bond yields and speculation of a September rate hike by the Bank of Japan, fueled by U.S. Treasury Secretary Scott Bessent's repeated pressure on Japan to raise interest rates.

The Nikkei index continued its decline in the afternoon as bond yields remained elevated. Analysts suggest that if bond yields stabilize above 3 percent, it could raise concerns about negative impacts on corporate earnings.