Global Market: Japan's Nikkei falls nearly 2% as rate hike expectations weigh on sentiment

Japan’s Nikkei share average fell nearly 2% on Monday as growing expectations of interest rate hikes by major central banks to contain inflation weighed on investor sentiment.

The benchmark Nikkei 225 fell 1.97% to 65,096.63 in early trading, while the broader Topix declined 0.84% to 4,111.71.

Investor sentiment was also pressured by losses on Wall Street last week after Federal Reserve Chair Kevin Warsh reiterated the U.S. central bank’s focus on bringing inflation under control, strengthening expectations of a potential interest rate hike.


Markets are now pricing in a near certainty that the Bank of Japan will raise interest rates at its meeting next month. Japanese government bond yields climbed to fresh multi-decade highs on Monday, reflecting growing expectations for tighter monetary policy.

Reuters reported that analysts expect the combination of weaker U.S. stocks and rising expectations for higher U.S. interest rates to weigh on Japanese equities. Financial stocks, however, could attract buying interest as higher domestic rates are expected to support bank earnings and margins.

The Topix may therefore prove more resilient than the Nikkei 225.

On the Nikkei 225, 150 stocks declined, compared with 70 advancers, while five remained unchanged.

Advantest was the biggest decliner, falling 7%, followed by Mitsubishi Materials, which dropped 6.37%, and Japan Steel Works, down 5.38%.

Among the gainers, Kansai Electric Power rose 6.22%, Tokai Carbon advanced 5.08%, and JTEKT gained 4.10%.


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