Japan stocks fall as US-Iran strikes lift oil, bond yields

TOKYO: Japanese shares fell on Wednesday as renewed US attacks on Iran pushed oil prices higher, stoking fears of an economic slowdown, while rising bond yields pressured growth stocks.

The Nikkei fell 2.95% to 64,254.56 as of 0154 GMT.

The broader Topix lost 2.37% to 4,082.89, on course to snap a nine-session rally.

“The markets fell in a broad sell-off today. The markets braced for the impact of the rises in oil prices,” said Daisuke Hashizume, a senior strategist at Daiwa Securities.

Oil prices rose nearly 1% in early trade on Wednesday, extending the previous session’s surge, as concerns over supply disruption intensified after the US and Iran exchanged strikes overnight, dimming hopes for a quick easing of tensions in the Middle East.

Technology investor SoftBank Group fell 6.233%, and chip-related Tokyo Electron and Advantest lost 2.82% and 4%, respectively.

Rising global bond yields weighed on growth shares, such as chip-related stocks, said Hashizume.

“Bond yields rise when the economy is strong, but the latest move in yields is not reflecting healthy sentiment and is being dragged down by worries about fiscal risks,” he said.

Japan’s 10-year government bond yield rose to as high as 3.01% on Wednesday, its highest level since September 1996, while the two-year bond yield rose to 1.83%, its highest since April 1995, on growing bets of faster Bank of Japan interest rate hikes.

Toyota Motor fell 2.5% to weigh on the Topix.

Honda Motor lost 2.39%. Bank shares, which typically rise when yields rise, also fell, with Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group down 0.8% each.

Drug makers rose, with Sumitomo Pharma , Shionogi & Co rising 1.48% and 0.92%, respectively, to become the top percentage gainers on the Nikkei.

Of more than 1,300 stocks trading on the Tokyo Stock Exchange’s Prime Market, 93% fell, 5% rose, and 1% traded flat.