TOKYO: Japanese shares slumped on Thursday, as investors sold expensive growth stocks after hawkish US Federal Reserve meeting minutes sparked a sell-off on Wall Street last night, while market heavyweight Toyota Motor extended gains to a third day.
By 0202 GMT, the Nikkei share average had lost 1.7% to 28,833.71 and the broader Topix had fallen 1.06% to 2,017.82. The Mothers Index of start-up firms fell 3.64%, extending losses as investors shifted focus to bigger stocks.
US stocks fell sharply overnight, with the Nasdaq down more than 3% in its biggest drop since February, after minutes of the Fed's last meeting signalled the central bank may raise interest rates sooner than expected.
Japanese shares edge higher as gains in Toyota, Sony offset tech losses
"Investors are shifting their focus to value stocks from growth, and they are targeting large and liquid stocks, which is why Toyota is still strong," said Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Research Institute.
"When the market outlook is not clear, investors tend to seek liquidity. Also, investors are using cash generated from selling bonds to buy shares with low risks and low returns."
Japan's benchmark 10-year government bond yield hit the highest since November 2021, tracking a steady rise in US Treasury yields.
Rising interest rates increase borrowing costs for businesses and consumers. Higher rates can depress stock multiples, especially for technology and other growth stocks.
Toyota Motor rose 1.4%, adding more than 10% in the first three sessions of the year after a 32% jump last year.
Sony Group tumbled 6.51% after Wednesday's near 4% gain, and dragged the Topix the most.
Uniqlo clothing shop owner Fast Retailing lost 3.2% after its December sales for existing stores fell 11.1%.
Medical equipment maker Terumo tumbled 7.67% after Mizuho Securities cut its target price, while medical services platform M3 tanked 7.39%.
Airlines and railways took a hit, losing 1.69% and 1.39% respectively, as the number of new coronavirus infections have started rising.
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