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Japan stocks crumble on bond market moves

Hideyuki Sano and Stanley WhiteAAP
Japanese shares have slumped, logging their biggest daily decline in nearly a year.
Camera IconJapanese shares have slumped, logging their biggest daily decline in nearly a year.

Japanese shares have slumped, logging their biggest daily decline in nearly a year, after a spike in global bond yields spooked investors already uneasy about the market's stretched valuation.

The Nikkei average on Friday ended down 3.99 per cent at 28,966.01, hitting its lowest level in almost three weeks. The broader Topix fell 3.21 per cent to 1,864.49. Both indexes posted their biggest single-day fall since April last year.

All of the Tokyo Stock Exchange's 33 industry subindexes were in the red, with electronic machinery makers, pharmaceuticals and real estate companies falling more than 3 per cent.

Semiconductor-related shares, one of the main leaders of the market's rally to 30-year highs, succumbed to heavy selling, after US chip shares fell 5.8 per cent.

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Sumco fell 5.59 per cent, while Lasertec shed 5.33 per cent. Advantest dropped 7.51 per cent, while Screen Holdings lost 6.53 per cent.

Precautions about rising inflation and a weak US bond auction boosted global bond yields, dampening investors' appetite for risk assets.

Analysts pointed to market's sharp rise as contributing to its current slide as well. "In a nutshell, I think the stock market had risen a bit too much," said Soichiro Monji, chief strategist at Nishimura Securities.

Rising bond yields also hit assets that have been considered as an alternative to low-yielding bonds. The TSE's index of real estate investment trusts (REITs) fell 2.84 per cent

Market players are now awaiting whether the Bank of Japan, which has refrained from buying stock exchange traded funds (ETFs) so far this month, will purchase them later in the day.

The central bank in its next policy meeting is expected to signal it will make its ETF purchases more flexible.

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