Global Market: Japan’s Nikkei falls 2% as tech selloff, rising oil prices fuel inflation fears

Japan’s Nikkei share average tumbled on Monday as a selloff in US technology stocks and rising oil prices heightened concerns about inflation and the prospect of higher interest rates, according to a report by Reuters.

The benchmark Nikkei 225 fell 2.05% to 63,984.45 in early trading, while the broader Topix index declined 1.22% to 4,016.34.

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According to Reuters, Japanese equities came under pressure following losses on Wall Street on Friday, led by declines in artificial intelligence (AI)-related and semiconductor stocks. The weakness in US technology shares weighed on investor sentiment, while a more than 3% jump in oil prices added to inflationary concerns.

Rising energy costs have emerged as a key source of market volatility, fuelling concerns that central banks may need to maintain tighter monetary policies or raise interest rates further to contain inflation.

Bank of Japan Governor Kazuo Ueda said on Monday that underlying inflation was quite close to the central bank’s 2% target, highlighting the importance of keeping inflation anchored around that level, the report stated.

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The prospect of tighter monetary policy could add to pressure on equities, particularly growth-oriented technology stocks, which tend to be sensitive to higher interest rates.

However, buying interest in value and defensive stocks could help limit broader market losses. Yuta Okamoto, a market analyst at Tokai Tokyo Intelligence Laboratory, said in a note that purchases of value and defensive shares could provide support even as chip-related stocks weighed on the index.

Market breadth on the Nikkei 225 remained weak, with 147 stocks declining against 78 advancing, while none were unchanged.

Taiyo Yuden was the biggest percentage loser on the index, falling 7.42%. Sumitomo Electric Industries dropped 5.96%, while Sumco declined 5.88%.

Toho was the top percentage gainer, rising 3.64%. Baycurrent gained 2.80%, while Aeon advanced 2.14%.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)