Tokyo, Japan – Japanese stocks rose on Tuesday, buoyed by a decline in domestic bond yields from record highs. This helped improve investor sentiment, despite pressure on the artificial intelligence technology sector.
Key indicators performance
The Topix index rose 0.5% to 3422.23 points, approaching its all-time high of 3434.60 points set earlier this month.
The Nikkei 225 index remained stable at 50,404.63 points. Declines in shares of major companies such as Advantest and Tokyo Electron limited the index’s gains, despite most other stocks rising.
Bonds and the Bank of Japan
The stock market rebound coincided with a decline in Japanese government bond yields across all maturities. This restored calm to the market after a two-day rally that saw 2-year, 20-year, and 30-year bonds reach record highs.
Returns had previously increased as a result of:
Traders braced for an interest rate hike after the Bank of Japan’s decision last Friday to raise borrowing costs to their highest level in three decades.
Expectations of an increase in the supply of bonds to finance the new government’s fiscal stimulus plans.
Analysts’ view
Maki Sawada, an equity analyst at Nomura Securities, explained that the decline in returns is providing strong support for the stock market as a whole. She noted that the caution surrounding AI stocks is not due to any specific negative news, but rather “a natural pullback after the previous highs,” amid concerns about the valuations of these companies.
