PrintJapanese stocks, bonds decline on slowdown concerns; BOJ comments in focus
BY Reuters | ECONOMIC | 03/18/26 10:29 PM EDTBy Junko Fujita
TOKYO, March 19 (Reuters) - Japanese stocks and bonds dropped on Thursday, while the yen remained fragile, as investors weighed the economic impact of the prolonged Middle East conflict.
Markets were also closely watching how the Bank of Japan will respond to the war-driven oil shock in its policy decision later in the day.
The benchmark Nikkei sank 2.9% to 53,640.77, while the broader Topix slid 2.18% to 3,636.94. The 10-year Japanese government bond yield rose 4.5 basis points (bps) to 2.260% as the yen traded at a near two-year low against the dollar.
"Investors are seeing that the Middle East conflict will drag on, and they weigh the downward pressure on corporate earnings," said Wataru Akiyama, a strategist at Nomura Securities.
Oil prices settled higher on Wednesday and climbed further in extended trade after Iran attacked several energy facilities across the Middle East following a strike on its South Pars gas field, a major escalation in its war with the U.S. and Israel.
A surge in oil prices is weighing on Japan's import-dependent economy by pushing up inflation, raising manufacturing costs, and threatening to slow economic growth.
All but two of the Tokyo Stock Exchange's 33 industry sub-indexes dropped. The shipping and mining sectors rose 0.4% and 1.2%, respectively, suggesting the market's bets on the war to prolong, Akiyama said.
The BOJ is expected to keep its interest rates steady after it concludes a two-day policy meeting later in the day, but market views on the future rate path are divided as the Middle East conflict continues to add to domestic price pressures.
"A major focus will be on how much caution the Bank of Japan will show regarding the risk of upward pressure on inflation, given its relatively accommodative policy stance," Ataru Okumura, a senior strategist at SMBC Nikko Securities, said in a report.
Shares related to chipmakers and artificial intelligence
dragged the Nikkei lower, with Advantest
The yen was up 0.2% at 159.62 after reaching 159.905 in the previous session, the weakest point since July 2014.
(Reporting by Junko Fujiat, Editing by Sherry Jacob-Phillips)
