Warsh's Hawkish Comments Spark Japanese Stock Decline

Japanese stocks took a hit on Monday as investors grew more confident that the US Federal Reserve will raise interest rates in September. The Nikkei 225 Index fell 1.4% to below 65,500, while the broader Topix Index dropped 0.9% to 4,110.

The downturn was triggered by hawkish remarks from Federal Reserve Chair Kevin Warsh, who emphasized that inflation is not slowing significantly and reiterated the Fed's commitment to returning inflation to its 2% goal. This statement reignited expectations for a US rate hike in September.

The market also reacted negatively to rising oil prices following the US military's targeting of Iranian rocket launchers preparing to deploy mines into the Strait of Hormuz.

Domestically, Japanese industrial output unexpectedly increased in July, and retail sales growth exceeded forecasts. However, technology stocks were among those leading the decline, with Advantest, Terra Drone, SoftBank Group, Tokyo Electron, and Ibiden Co posting sharp losses.