Nikkei Plunges Over 1,500 Points Amid Rate Hike Expectations

The Nikkei Stock Average plummeted by over 1,500 points in the morning session on Monday, briefly falling below the 65,000 level. The decline was triggered by expectations of U.S. rate hikes following a speech by Federal Reserve Chair Warsh last week. Major stock indexes fell across the board in the U.S., with long-term interest rates rising as a result.

However, buybacks gained momentum in the afternoon, significantly narrowing the decline and ultimately limiting the Nikkei's fall to 93 yen from the previous weekend's close. The TOPIX, on the other hand, rose 9.58 points to close at 4,156.29, with more than half of Tokyo Stock Exchange Prime Market stocks finishing higher.

Market participants noted that rising long-term interest rates stoked concerns about increased corporate interest payment burdens and pressure on earnings. However, some see uncertainty over U.S. monetary policy capping near-term upside, while others argue that solid Japanese corporate earnings and shareholder return measures such as buybacks will limit the downside.