Japan's Nikkei falls as higher yields, inflation fears weigh

Japan's Nikkei share average declined on Tuesday as technology stocks suffered, with investors grappling with the prospect of higher bond yields and persistent inflationary concerns that cast doubt on the growth of shares. The Nikkei dropped 0.86% to 64,360.16 by 0204 GMT, while the broader Topix declined 0.95% to 4,028.97. Koji Toda, senior fund manager at Resona Asset Management, explained, "Bond yields are on the rise as markets anticipate central bank tightening to curb inflation."

This worry is affecting investor sentiment, especially in the face of a tech-heavy Nasdaq Composite that gained 1% overnight, fueling cautious optimism for the chip sector and AI-related stocks following a significant selloff last week. However, investors remain wary about the sustainability of this momentum. US Treasury yields had risen overnight, with the benchmark 10-year yield recovering from its largest weekly loss in seven months as concerns about higher interest rates' impact on AI-related stocks subsided.

SoftBank Group, which heavily invests in AI, experienced a 6% drop, making it the biggest drag on the Nikkei and its worst-performing index by percentage. Fibre optic cable manufacturer Fujikura and peer Furukawa Electric both fell 5.49% and 4.88%, respectively. Advantest, a chip-testing equipment maker, rebounded from early losses to close up 0.32%.

Fast Retailing, a Uniqlo-brand owner, rose 0.65% to provide the strongest support for the Nikkei. Unfortunately, banks declined, with Mizuho Financial Group slipping 2.87% and Mitsubishi UFJ Financial Group falling 1.61%. Out of over 1,500 stocks trading on the Tokyo Stock Exchange’s prime market, 76% fell, 20% rose, and 2% remained unchanged.