Nikkei Surges on Steady Bond Markets Ahead of US Inflation Data

Japan's Nikkei 225 index surged 1.94% to 66,753.72 as bond markets steadied before the highly anticipated US inflation data release.

The calm in government bonds made investors more comfortable owning riskier assets like stocks, which tend to be sensitive to interest rate changes.

However, the bigger test lies ahead with the upcoming US inflation print, as a hotter or cooler-than-expected reading can significantly impact traders' expectations of the Federal Reserve's next interest-rate decision.

The resulting movement in US Treasury yields often spills into foreign exchange markets, particularly the USD/JPY rate, which is closely watched by currency traders due to its significant impact on Japan's big exporters.