- The Japan TOPIX index recorded its sixth consecutive day of gains, primarily driven by the strengthening of global markets and the positive impact of OPEC+ increasing production, which led to a drop in oil prices. The aviation, automotive, and machinery sectors performed strongly.
- In contrast, the Nikkei 225 index, which has a high weighting of technology stocks, lacked clear direction throughout the day and closed almost flat, mainly dragged down by a sharp decline in semiconductor supply chain-related stocks.
- Cross-asset market volatility intensified as the yen weakened again, raising market concerns about Tokyo authorities intervening in the foreign exchange market. Japanese government bond prices fell sharply, with the benchmark 10-year Japanese government bond yield climbing to its highest level since October 1996.
Oil Price Decline Boosts Value Sectors
Benefiting from the positive impact of OPEC+ raising oil production targets over the weekend and the reopening of the Strait of Hormuz, international oil prices returned to a downward trend. This change directly improved the cost pressure and profit expectations of Japan's cyclical sectors, driving traditional value sectors such as transportation, automotive, and heavy industry to lead the market. Toyota Motor (7203:JP) closed up 3.36%, and Mitsubishi Heavy Industries (7011:JP) surged 8.39%, becoming the core drivers supporting the TOPIX index's rise, indicating that market funds are shifting towards manufacturing and export cyclical sectors sensitive to energy costs.
Technology Supply Chain Stocks Under Pressure
Amid high volatility in semiconductor and artificial intelligence-related stocks, technology industry supplier stocks faced significant selling pressure on Monday, directly suppressing the Nikkei 225 index's rebound. Leading the declines were electronic component manufacturers Taiyo Yuden (6976:JP), which plummeted 10.58%, Ibiden (4062:JP) down 8.37%, and Murata Manufacturing (6981:JP) also fell sharply by 7.49%. The collective decline of these heavyweight electronic stocks indicates a risk preference adjustment in some overvalued sectors, leading to a clear sectoral divergence between technology and traditional manufacturing.
Hawkish Central Bank Policy Expectations Weigh on Bond Market
Global central bank policy outlook remains a focal point for traders. Recent hawkish signals from Federal Reserve (Fed) Chairman Walsh have kept global liquidity expectations tight, while expectations for further tightening of monetary policy by the Bank of Japan (BOJ) continue to rise. Driven by these policy expectations, bullish funds have withdrawn from the bond market, causing Japanese government bond prices to come under significant pressure and fall sharply, with the benchmark 10-year Japanese government bond yield soaring to its highest level since 1996, reinforcing market revaluation of asset pricing amid rising risk-free interest rate centers.
Yen Depreciation Approaches Forex Intervention Threshold
In the foreign exchange market, the yen resumed its depreciation trend against the dollar, with interest rate differentials continuing to dominate cross-asset capital flows. While the yen's weakness objectively benefits export-oriented companies, it also exacerbates concerns about rising domestic inflation in Japan, forcing forex traders to remain highly vigilant about potential intervention by Tokyo authorities at any moment. Nomura Securities stock strategist pointed out that although the Wall Street holiday limited foreign capital guidance, the strength of the European market and yen exchange rate fluctuations are jointly influencing the Nikkei index's bottoming-out rhythm.
