Asian Equities Woes: Nikkei 225 Slides Amid Rising Yields and Inflation Concerns

Asian equities struggled on Friday as rising global bond yields and expensive oil weighed on valuations and inflation concerns. The Nikkei 225 fell about 0.8% in morning trade, extending its weekly loss to roughly 4.4%, while the KOSPI swung around flat after opening 1.35% lower.

The moves came as US Treasury yields resumed their climb, erasing much of the relief triggered by Washington's decision to expand long-bond buybacks. The 10-year Treasury yield climbed towards 4.71% and the 30-year approached 5.25%, reversing much of Wednesday's fall.

In Japan, inflation is strengthening just weeks before the Bank of Japan's next policy meeting on September 17-18. Core consumer prices rose 1.8% in July from a year earlier, accelerating from 1.6% in June. The BOJ is already running its policy rate at 1%, a 31-year high.

For rate-sensitive technology shares, the combination of higher Japanese rates, elevated US yields, and a yen trading near 159 per dollar presents a challenging mix. Higher discount rates reduce the present value of future earnings, particularly for companies priced on aggressive AI and semiconductor growth assumptions.