The Rise In Global Bond Yields Weighs On Japanese Stocks and Yen

Akira Ito
29 May, 2024
Tokyo

Weak yen and global interest rate worries weighed on market sentiment in Tokyo ahead of the release of the inflation update. 

The Nikkei and the Topix fell as much as 1%, and the yield on Japanese government bonds inched higher than 1% to a 12-year high after hawkish comments from non-voting members of the Federal Reserve's policymaker. 

Market sentiment in Tokyo was also on the defensive after the U.S. Treasury yields unexpectedly rose following the weaker-than-expected auction of 2-year and 5-year Treasury notes. 

The widening yield gap between the U.S. and Japan dragged the Japanese yen lower, and the currency traded at 157.86 against the U.S. dollar in late afternoon trading in Tokyo. 

Investors are also looking ahead to the release of the Tokyo area's inflation data for April, and the city's inflation is generally seen as a bellwether of the nationwide price trends. 

 

Japan Stock Movers 

The Nikkei 225 stock average dropped 0.8% to 38,556.87, and the Topix index declined 1% to 2,741.62. 

Stocks in Tokyo traded down on the ongoing monetary policy uncertainty and the weakness in the yen. 

Mitsubishi UFJ rose 0.6% to ¥1,637.0 and traded at an 18-year high on the expectations of the company benefiting from the weaker yen and rising bond yields. 

Last week, Mitsubishi UFJ reported a record profit of 1.5 trillion yen in the financial year 2024 and announced a stock repurchase program of 50 billion yen. 

The company also announced the CET1 ratio, a measure of risk capital, to range between 9.5% and 10.5%, and a dividend payout ratio of around 40%. 

Utilities and heavy industry-linked stocks were among the leading decliners. 

Tokyo Electric Power dropped 8.3% to ¥926.30, Mitsubishi Heavy Industries declined 3.6% to ¥1,308.0, and Teijin Ltd. fell 5.5% to ¥1,519.0. 

Diversified exporters and financial services were among the leading gainers. 

Sompo Holding, the diversified insurance group, rose 4.2% to ¥3,306.0; Hoya Corp., the maker of optical products for the semiconductor industry, gained ¥18,635.0; and Konami Group, the video game publisher, gained 3.3% to ¥10,905.0.