Japan's Nikkei slides nearly 2% following hawkish Fed comments

TOKYO: Japan’s Nikkei share gauge fell nearly 2% on Monday on rising expectations for central bank rate hikes to tame inflation.

The benchmark Nikkei 225 fell 1.97% to 65,096.63 in early trading.

The broader Topix slipped 0.84% to 4,111.71.

Wall Street’s main indexes ended lower last week after Federal Reserve Chair Kevin Warsh reiterated the central bank’s focus on fighting inflation, increasing prospects for an interest rate hike.

Markets have priced in a near certainty that the Bank of Japan will raise rates at its meeting next month. Yields on Japanese government bonds rose to fresh multi-decade highs on Monday.

“In addition to last week’s decline in US stocks, growing expectations of US interest rate hikes following remarks by Fed Chair Warsh are likely to weigh on investor sentiment,” Takayuki Miyajima, senior economist at Sony Financial Group, said in a note.

“On the other hand, financial stocks may see buying interest driven by expectations of rising domestic interest rates, and the Topix is expected to hold up better than the Nikkei 225.”

There were 70 advancers on the Nikkei 225 against 150 decliners and five unchanged.

The largest losers were Advantest, down 7%, followed by Mitsubishi Materials, 6.37% lower, and Japan Steel Works, which lost 5.38%.

The largest percentage gainers were Kansai Electric Power, up 6.22%, followed by Tokai Carbon, 5.08% higher, and JTEKT, which gained 4.10%.