TOKYO: Japan’s Nikkei share average fell on Thursday as investors pulled back after a powerful relief rally, with renewed concern over Middle East tensions and higher oil prices prompting a more defensive tone across the Tokyo market. The Nikkei 225 closed down 0.73% at 55,895.32, while the broader Topix lost 0.9% to 3,741.47. The retreat ended a four-session advance and came a day after both indexes surged on hopes that a ceasefire would ease pressure on energy markets and global supply routes.
The reversal followed a sharp rise of 5.4% in the Nikkei on Wednesday, when markets rallied on news of a two-week ceasefire between the United States and Iran and hopes for smoother passage through the Strait of Hormuz. By Thursday, that optimism had faded as regional hostilities again dominated trading sentiment. Oil prices turned higher, with U.S. crude up 3.1% at $97.33 a barrel and Brent crude up 2.1% at $96.86, reviving concern about inflation and fuel costs for import-dependent economies such as Japan.
The pullback in Tokyo came amid a broader cautious tone in Asia. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.7%, South Korea’s market slipped 0.4%, and Chinese blue chips were down 0.6%. In Tokyo, heavyweight growth stocks led the decline, with chip-testing equipment maker Advantest down 1.59% and technology investor SoftBank Group falling 3.95%. Nikkei 225 futures on the Chicago Mercantile Exchange had crossed 57,000 overnight, underscoring how quickly market sentiment turned after Wednesday’s surge.
Oil rebound revives caution
Bank of Japan Governor Kazuo Ueda added another layer for investors to assess after saying Japan’s financial conditions remain accommodative and short- and medium-term real interest rates are clearly negative. His remarks kept attention on the central bank’s policy path at a time when higher energy prices are feeding fresh inflation concerns. Earlier this week, the BOJ warned that fallout from the Middle East conflict could worsen regional economic conditions, as rising import costs and supply disruptions weigh on sentiment among businesses and consumers.
Japan’s exposure to imported fuel has made swings in oil especially important for local equities during the latest bout of volatility. The six-week conflict in the Middle East had already disrupted traffic through the Strait of Hormuz, a critical route for around one-fifth of global oil and liquefied natural gas shipments. Thursday’s decline in Japanese shares reflected that sensitivity, as investors weighed the risk that elevated energy prices could lift costs for manufacturers, transport firms and households even if financial conditions remain loose for now.
Foreign buying still underpins market
Despite the day’s decline, overseas investors recently returned to Japanese equities in force. Data released on Thursday showed foreign investors bought a net 2.96 trillion yen, or about $18.65 billion, of Japanese stocks in the week through April 4, reversing three straight weeks of net selling. The scale of those purchases suggested international appetite for Japanese assets remained intact even as daily trading became more volatile. The BOJ’s next policy meeting, scheduled for April 27-28, is likely to remain a focal point for traders navigating that backdrop.
Thursday’s session left Tokyo stocks lower but still well above levels seen during the worst of the recent energy-driven selloff, highlighting how closely Japanese equities are tracking developments beyond the country’s borders. The Nikkei’s drop also showed that after a rapid rebound, investors were unwilling to extend gains without clearer evidence that geopolitical tensions were easing and oil markets were stabilizing. For now, the market’s direction remains tied to those external pressures as much as to domestic monetary signals – By Content Syndication Services.