Japan's Nikkei 225 rebounded on Thursday, climbing about 1% to 65,982 in morning trade, as a retreat in global bond yields revived demand for technology shares. The bounce recouped a portion of Wednesday's 3.2% slump, which had dragged the index to a two-week low. The broader Topix added roughly 0.9%, with Kioxia Holdings and SoftBank Group among the strongest performers as investors returned to stocks hit hardest in the previous session's selloff.
Treasury buyback plan sparks relief
The catalyst came from the US bond market. The Treasury Department announced it will at least double the maximum size of liquidity-support buybacks for longer-dated government debt, raising the cap from $2 billion to at least $4 billion per operation starting September 9. Long-term Treasury yields fell sharply after the announcement, with the 30-year yield hovering around 5.18% in Asian trading and the 10-year easing to roughly 4.63%. Japanese, Australian, and New Zealand bonds followed the move higher.
That provided immediate relief for the Nikkei, where richly valued semiconductor and AI-linked companies had been especially vulnerable to rising borrowing costs. Kioxia rose almost 5% after tumbling more than 12% on Wednesday, while SoftBank recovered nearly 4% following a decline of more than 10%. Market commentary suggested much of Kioxia's previous fall reflected technical selling rather than a deterioration in its underlying business.
Domestic bond risks persist
Thursday's bounce does not erase the pressures facing Japanese equities. Japan's 10-year government bond yield approached 3% this week, its highest in about three decades, as investors weighed inflation, fiscal spending, and the possibility of further Bank of Japan tightening. The yen also strengthened towards 158.20 per dollar on Thursday, a potential headwind for exporters if the move continues. Meanwhile, Japan recorded a ¥634.5 billion trade deficit in July even as exports rose 23.2% from a year earlier.
The combination means the Nikkei remains sensitive not only to Wall Street and US yields, but also to Japan's increasingly difficult domestic rate backdrop. For a broader perspective on recent moves, see our coverage of Japan's 30-year yield hitting 4.11% and the Nikkei's reaction to GDP misses.
KOSPI surges on SK Hynix buyback
Elsewhere in Asia, South Korea's KOSPI surged as much as 5.8%, easily outperforming the region after SK Hynix unveiled a 40 trillion won share buyback programme. The chipmaker jumped more than 5%, adding another catalyst to the broader semiconductor rebound. Hong Kong's Hang Seng gained about 1%, while the Shanghai Composite added roughly 0.25% after China kept its one-year and five-year loan prime rates unchanged at 3% and 3.5%, respectively, for a 15th straight month.
Fed minutes and geopolitical risks linger
Still, the rally faces limits. Minutes from the Federal Reserve's July meeting showed many policymakers believed tighter policy could become necessary if inflation failed to ease, while several had already favoured a rate increase in July. Middle East tensions add another risk, with Brent remaining above $90 as uncertainty around Iran and the Strait of Hormuz kept energy prices elevated. For more on how these factors are influencing markets, see our analysis of Treasury yield retreats lifting equities and Iran sanctions and Fed pause bets.
This article is for informational purposes only and does not constitute financial advice.
