Japanese stocks fell on Thursday, influenced by investor concerns over the Middle East crisis and technology sector evaluations. The Nikkei index dropped by 0.47%, closing at 64,693.12 points. In the previous session, the index had risen by 2.2%, reaching a record level of 66,428.81 points before closing unchanged.
The broader Topix index also declined by 0.41% to 3,902.01 points. Shares of Japanese technology companies experienced a notable drop, with the pace of decline accelerating following airstrikes exchanged between Iran and the United States, raising concerns about the prospects for a lasting peace agreement.
Details of the Event
Commenting on the Nikkei index level, Wataru Akiyama, an equity strategist at Nomura Securities, stated: "Given the weakness in the U.S. stock market as well, particularly in the semiconductor sector, the market is likely to hover around the 65,000-point level unless new factors emerge." He added: "Considering the rapid rise, caution is increasing regarding trading at these high levels, so we expect this decline to continue."
So far in 2026, the Nikkei index has risen by nearly 29%. On Thursday, 90 companies saw their shares rise, while 13 companies experienced declines. Taiyo Yuden had the largest increase, with its shares rising by 17%, followed by Murata Manufacturing, which jumped by 9.2%.
Background & Context
Meanwhile, the yield curve for Japanese bonds steepened on Thursday, while the yen fell to levels that suggest new intervention may be needed, as concerns about imported energy price inflation resurfaced due to escalating tensions in the Middle East. The yield on 30-year Japanese government bonds rose by 3.5 basis points to 3.950%.
The yield on two-year bonds, which are most sensitive to interest rates set by the Bank of Japan, fell by two basis points to 1.360%, the lowest level since April 27. The yield on five-year bonds also fell by the same amount to 1.910%.
Impact & Consequences
The value of the yen dropped to 159.65 yen per dollar, the lowest level since April 30 when Tokyo intervened in the markets to support the currency. Oil prices rose on Thursday after Tehran announced it targeted a U.S. airbase following reports of Washington conducting strikes on Iranian drone operations near the Strait of Hormuz.
Japan heavily relies on imported energy, making its economy, bond market, and currency vulnerable to sharp increases in oil prices resulting from the ongoing three-month conflict. Inflation erodes the value of fixed debt payments.
Regional Significance
The Arab region is directly affected by tensions in the Middle East, as these events contribute to rising oil prices, impacting the economies of oil-importing countries. Additionally, the continuation of political crises may affect foreign investments in the region.
In conclusion, the economic situation in Japan remains under scrutiny, as investors look for any signs indicating market stability or improvements in geopolitical conditions.