Japan shares rise as bond yields retreat; tech jitters weigh on Nikkei

TOKYO: Japanese stocks rose on Tuesday as a retreat in domestic bond yields from record highs lifted sentiment, although persistent worries about artificial intelligence-linked share valuations weighed on the tech-heavy Nikkei.

The broader Topix climbed 0.5% to 3,422.23 by 0132 GMT, taking it close to the record high of 3,434.60 hit earlier this month.

However, the Nikkei was little changed at 50,404.63, with heavily weighted chip-sector stocks Advantest and Tokyo Electron countering advances for most other shares.

Of the Nikkei’s 225 components, 154 rose versus 69 decliners and two that traded flat.

Japanese government bond (JGB) yields declined across maturities as calm returned to the market following a two-day spike to all-time peaks for two-, 20- and 30-year debt.

Yields have risen as traders positioned for further interest rate hikes after the Bank of Japan raised borrowing costs to a three-decade high on Friday, while also preparing for increased bond supply to fund the new government’s fiscal stimulus.

“The retreat in yields is supporting the overall stock market,” said Maki Sawada, an equities strategist at Nomura Securities.

At the same time, “there are still some worries about AI stock valuations, which is weighing on the Nikkei,” she said.

“There’s no particular bad news that’s acting as a trigger - it’s just a pullback after such a substantive rally.”

Advantest sank 2% and Tokyo Electron lost 0.6%, shaving a combined 136 index points from the Nikkei.

That’s despite advances for US chip stocks overnight, which helped all three main Wall Street indexes to post gains.

Even with JGB yields coming down, expectations for further BOJ policy tightening continued to support banks and securities firms, on an improved outlook for lending and investing. Banks as a sector gained 1.1%, insurers added 1.4%, securities firms climbed 1.4%, and other financial companies jumped 1.5%.

They were among the best performers in the Tokyo Stock Exchange’s 33 industry groups. Only two sectors fell: nonferrous metals, down 1%, and the auto sector, off 0.4%.

Carmakers were hobbled by a rebound in the yen, which dents the value of offshore revenues. Toyota declined 0.4% and Mazda dropped 1.8%.