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Japan's Nikkei, bonds hit multi-month lows on war-driven inflation fears
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Japan's Nikkei, bonds hit multi-month lows on war-driven inflation fears
Mar 22, 2026 7:23 PM

(Adds comments, details and updates stock prices)

By Junko Fujita and Satoshi Sugiyama

TOKYO, March 23 (Reuters) - Japan's stocks and bonds

sank to multi-months lows on Monday as an escalation in the

Middle East war stoked inflation fears and concerns over an

economic slowdown.

The Nikkei slumped as much as 5% earlier in the

session, wiping out all its gains for the year. The Nikkei had

surged to a record high of 59,332.43 last month and was on track

to breach the 60,000 mark, fuelled by expectations that Prime

Minister Sanae Takaichi's stimulus plan would accelerate

corporate growth.

The index traded more than 14% lower from the record high on

Monday, as the Strait of Hormuz, a vital link to Japan's oil

supply, remains closed. The country gets around 90% of its oil

shipments via the passage.

"Local firms may have to lower their outlook for the next

fiscal year due to the surging oil prices from the prolonged

Middle East war," Kazuaki Shimada, chief strategist at IwaiCosmo

Securities.

"The rising oil prices would also slow down and hurt the

economy, which would also affect corporate earnings."

The Nikkei was last down 3.5% at 51,514.78, as of

0147 GMT, and the broader Topix fell 2.86% to 3,504.78.

The 10-year Japanese government bond yield

jumped as 6 basis points (bps) to 2.320%, its highest point

since January 21.

Bond yields move inversely to prices.

Iran said on Sunday it would strike the energy and water

systems of its Gulf neighbours if U.S. President Donald Trump

followed through with a threat to hit Iran's electricity grid in

48 hours, extinguishing any hope of an early end to the war, now

in its fourth week.

Trump said on Sunday that Iran had 48 hours to open the

vital strait, which is effectively closed for most vessels.

Inflation may add pressure on global central banks to raise

interest rates, which is negative to equities, said Shuutarou

Yasuda, a market analyst at Tokai Tokyo Intelligence.

The Bank of Japan held its interest rates steady on Thursday

but kept the possibility of an early rate hike alive by warning

surging oil prices could exacerbate inflationary pressures.

Chip-related shares led the Nikkei's decline, with Advantest ( ADTTF )

and Tokyo Electron ( TOELF ) falling 5.8% and 3.1%,

respectively.

Of more than 1,600 stocks trading on the Tokyo Stock

Exchange's prime market, 94% declined, and 4% advanced, and 1%

traded flat.

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