Japanese shares trade mostly lower on weak GDP data, surge in JGB yields

TOKYO: Japanese shares traded mostly lower on Monday as investors weighed weaker-than-expected domestic growth data and the impact of the Middle East crisis on inflation and bond yields.

The benchmark Nikkei 225 edged 0.01% lower to 68,721.56 in early trading.

The broader Topix slipped 0.48% to 4,177.02. Japan’s economy expanded at an annualised 1.1% in the three months through June, undershooting the 2.0% median forecast, according to data released on Monday.

The weaker growth, driven by flat private consumption and a 1.2% drop in capital spending, added to concerns about the resilience of domestic demand.

Geopolitical tensions in the Middle East, including disruptions to tanker traffic through the Strait of Hormuz, kept oil prices elevated, pushing yields on Japanese government bonds (JGBs) to multi-decade highs.

“Due to factors such as the intensifying inflationary pressures stemming from turmoil in the Middle East, both short- and long-term interest rates have been rising recently,” said

 Wataru Akiyama, an equities strategist at Nomura Securities.

“This rise in interest rates may act as a factor capping the upside of the stock market.”

The weaker-than-expected GDP data suggests that inflationary pressures and a US economic slowdown may be spilling over into Japan, Akiyama said.

There were 71 advancers on the Nikkei 225 against 151 decliners and three unchanged.

The largest percentage gainers in the index were Kioxia Holdings, up 5.14%, followed by Archion, 5.07% higher, and Nexon, which gained 3.44%.

The largest losers were Ebara, down 9.40%, set for its steepest one-day fall since November 2025, followed by Trend Micro, 8.94% lower, and Dentsu Group, which lost 7.91%.