Nikkei Slips 0.8% as Oil Tops $100 Amid BOJ Rate Hike Expectations

Japan's stock market experienced a decline on Monday as oil prices surged above $100 per barrel. The Nikkei, Japan's main stock index, fell by 0.8% due to concerns over higher energy costs and inflation.

The price of crude oil rising above $100 has sparked worries about the impact on consumer spending and global bond yields. This has led investors to bet that central banks will maintain tighter monetary policies for longer, which could push up interest rates further.

Bank of Japan board member Kazuyuki Masu commented that the central bank may need to raise interest rates rapidly if it falls behind inflation, fueling expectations of a rate hike next week. The comments contributed to higher government bond yields in Japan, which can benefit banks and securities firms but hurt other companies with high future cash flows.

The Bank of Japan's potential pivot has left investors cautious ahead of upcoming US inflation data releases and central bank decisions. As a result, the market is expected to remain volatile until the path for interest rates becomes clearer.