Forex

Nikkei 225 Index Slumps as Rising Bond Yields and BoJ Rate Hikes Loom

Guavy AI Editorial Team Published August 20, 2026

Instruments

JPY

The Nikkei 225 Index has been on a downward trend due to rising Japan bond yields. The 30-year government bond yield surged to 4.11%, its highest level since May 20th, while the five-year yield jumped to 2.13%. This upward trend is not unique to Japan, as long-term yields are increasing globally.

The US-Japan rate gap has widened due to the Bank of Japan's (BoJ) reluctance to raise interest rates. However, with inflation rising and crude oil prices hitting $91.8 for Brent and $85 for West Texas Intermediate (WTI), the BoJ may be forced to hike rates soon.

Analysts at Mizuho predict that the bank will increase interest rates more frequently in the near future. This would compress equity multiples, particularly for long-duration tech and banks, leading to a decline in the Nikkei 225 Index.

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