Japanese Markets Close Lower as Global Yields Weigh

Japanese stock markets closed sharply lower in Friday's trading (Sept. 11) as a surge in oil prices and rising global bond yields triggered a sell-off in risk assets. The Nikkei 225 ended around 63,967, down approximately 2% from the previous close, while the Topix fell 1.84% to 3,979.92.

Primary pressure stemmed from the energy market after Brent crude briefly approached US$110 per barrel due to escalating Middle East conflict and threats to strategic shipping lanes. The oil surge reignited concerns that global inflation could remain elevated, forcing central banks to maintain tight monetary policy for longer.

Bond markets also weighed on sentiment. The yield on the 10-year US Treasury briefly hit around 4.98%, nearing the psychological 5% level, while Japanese bond yields also climbed. Rising funding costs placed significant pressure on technology stocks and companies with high valuations.

Technology stocks were a major drag during the session, with Kioxia Holdings, SoftBank Group, and Advantest facing heavy selling pressure. Investors also reduced risk exposure ahead of the US CPI release, which could reinforce or dampen expectations for a Federal Reserve rate hike next week.

Domestically, expectations of a Bank of Japan rate hike also weighed on sentiment. Japan's producer price inflation was reported to have risen 7.6% year-on-year, reinforcing the view that the BOJ still has grounds to proceed with monetary policy normalization.