Japan’s Nikkei share average fell by 0.82% on Tuesday as investors sold stocks to secure profits following a strong rally. The decline was exacerbated by the overnight rise in U.S. Treasury yields, dampening market sentiment. By 0130 GMT, the Nikkei had dropped to 32,441.52, after closing at a one-month high in the previous session, thanks to four consecutive days of gains amounting to 6.5%. The broader Topix index also slipped by 0.56% to reach 2,347.18.
The recent upward trend in U.S. Treasury yields had caused investors to sell off stocks, leading to the loss of momentum in the Nikkei until last week. However, during the four previous sessions, investors began buying back stocks due to the downward trend in U.S. Treasury yields. The recent caution surrounding large auctions of notes and bonds in the United States, which will determine the demand for U.S. government debt, caused U.S. Treasury yields to climb overnight. This pause in the decline became a cue for investors to sell stocks and lock in profits.
Fast Retailing, the owner of the Uniqlo brand, experienced a minor decline of 0.17%. Meanwhile, Tokyo Electron, a heavyweight chip-making equipment maker, suffered the most, with a loss of 1.19%. Ajinomoto, a food maker that recently raised its annual net profit forecast, was the worst performer on the Nikkei, with a decline of 7.14%. Additionally, JSR, a chip materials maker, slashed its operating profit forecast for the current financial year by 62%, leading to a 1.6% fall in its stock. On a positive note, machinery maker Hitachi Zosen rose by 5.59%, making it the top performer on the Nikkei after raising its annual profit forecast.
The decline in the Nikkei can be attributed to a combination of profit-taking by investors and the impact of rising U.S. Treasury yields on market sentiment. Looking ahead, market participants will closely monitor the performance of U.S. Treasury yields and the outcome of the large auctions of notes and bonds in the United States. These factors will provide indications of demand for U.S. government debt and potentially influence market sentiment in Japan. Additionally, individual company performances, such as Ajinomoto’s raise in net profit forecast and JSR’s operating profit cut, will also be of interest to investors.
