As sentiment soured in response to increased U.S. yields and the Federal Reserve’s proclamation of an extended period of tight financial conditions, Japan’s Nikkei share average fell to a four-month low on Tuesday.
At 02:25 GMT, the Nikkei fell 1.23% to 31,367.578 after falling as low as 31,260.99 for the lowest time since June 2.
Twenty of the 225 components of the index rose, while the remaining 204 decreased.
The larger Topix fell by almost 1%.
After Fed Governor Michelle Bowman and Fed Vice Chair for Supervision Michael Barr reinforced the higher rates for longer refrain at separate events, the benchmark 10-year Treasury yield surged to a new 16-year high above 4.7% overnight.
The yen fell to its lowest level in a year at about 150 yen to the dollar, but the jump in long-term U.S. yields did nothing to boost shares of Japanese exporters.
Mazda dropped 4.5%, and Toyota Motor fell 2.1%.
“Normally, yen weakness would be a reason for stocks to rise, particularly the exporters, because it boosts overseas profits,” said Maki Sawada of Nomura Securities.
“But because a rise in long-term yields is what led to the move, it is a burden on the Nikkei.
The yield on 10-year Japanese government bonds increased to its highest level in ten years, rising to 0.78%.
The likelihood of continuing difficult financial conditions also contributed to the overnight 2% decline in crude oil prices.
Because of this, shares of energy companies suffered the most, falling 5.14%.
The Nikkei stock with the worst performance was Inpex, an oil business, which fell 6.22%. The engineering firm JGC Holdings, which is also active in the oil industry, came in second with a decline of 5.15%.
Some solace was supplied by tech companies, in part due to the Nasdaq’s success overnight on Wall Street.