Nikkei index briefly falls over 3% on crude oil, bond yields rises

Tokyo stocks plummeted sharply on Friday, with the Nikkei index briefly dropping over 3%, following West Texas Intermediate crude oil futures surpassing the $100 per barrel threshold, while bond yields surged, sparking inflation worries. The 225-stock Nikkei Stock Average closed 1,259.61 points, or 1.93%, lower at 64,011.34. The wider Topix index fell 26.28 points, or 0.65%, to 4,028.30.

Among the top-tier Prime Market, nonferrous metal, electric appliance, and oil and coal product shares experienced the steepest declines. The U.S. dollar temporarily dipped below 154 yen in the afternoon, amid uncertainty surrounding the Federal Reserve's rate hike decision. The U.S. consumer price index for August, released later in the day, may shed more light on the Fed's policy direction.

Japan's benchmark 10-year government bond yield briefly jumped 0.090 percentage points from Thursday's close, hitting 3.000%, after touching 3% for the first time in nearly 30 years the previous week. With no indications that Middle East oil shipments are returning to normal, West Texas Intermediate crude oil futures prices have broken the psychologically significant mark for the first time since mid-May.

Rumors that top White House advisers, including Vice President JD Vance and Secretary of State Marco Rubio, privately informed President Donald Trump that the conflict could persist beyond his tenure have further derailed market sentiment. Inflation concerns, fueled by higher oil prices and growing speculation about rate hikes following the release of the producer price index, led to a rise in U.S. Treasury yields, affecting Japanese bond yields as well, dampening sentiment in the Tokyo market.

Artificial intelligence- and semiconductor-related shares were among the biggest losers, with losses partially recovered in the afternoon as buying activity expanded to other sectors, including financial shares that capitalized on rising bond yields and automobile shares benefiting from buyback programs. Although some believed rising bond yields wouldn't significantly impact AI- and chip-related shares, they were sold again once negative indicators emerged, as these stocks have yet to demonstrate a robust upward trend, according to Toshikazu Horiuchi, an equity strategist at IwaiCosmo Securities Co.