TOKYO - Tokyo stocks fell sharply on September 2, with the Nikkei 225 closing at 64,325.64, down 1,889.70 points, as renewed U.S. strikes on Iran sent oil prices higher, pushed bond yields up globally and triggered heavy selling across semiconductor, technology and export-related shares.
The broader TOPIX fell 100.26 points to 4,081.60, ending its nine-session winning streak. The decline marked a sharp reversal from the resilience seen through late August and September 1, when TOPIX had continued rising despite weakness in the Nikkei.
The selloff began before the Tokyo open. Nikkei 225 futures had already fallen heavily in overnight trading after reports of renewed U.S. attacks on Iranian targets, and the cash market opened more than 1,000 points lower. The Nikkei started at 65,195.43, down 1,019.91 points, and continued weakening as investors sold risk assets across Asia.
By the afternoon session, the Nikkei was down more than 1,700 points, opening the second half at 64,436.30. The index remained under pressure into the close as investors reduced exposure to stocks most vulnerable to higher oil prices, higher interest rates and global technology selling.
The September 2 fall was much broader than the previous day’s mixed session. On September 1, the Nikkei had slipped only slightly while TOPIX rose for a ninth straight day. On September 2, the bond and oil shock overwhelmed the rotation into value shares, and the market turned into a full risk-off session.
Nikkei CNBC-style market commentary would likely focus on the way several negative forces hit Tokyo at once: renewed Middle East fighting, a jump in crude oil, a global bond selloff, expectations for additional Federal Reserve tightening, a weak yen near 160 to the dollar and rising expectations for another Bank of Japan rate increase.
The global trigger was the Middle East. Reuters reported that renewed U.S. airstrikes on Iran pushed Brent crude to around $95.45 a barrel and drove investors into a more defensive posture. The rise in energy prices revived inflation concerns and placed upward pressure on long-term interest rates.
For Japan, the oil shock is especially damaging because the country imports most of its energy. Higher crude prices feed into gasoline, electricity, aviation fuel, shipping, logistics, chemicals and manufacturing costs. The impact becomes even more severe when the yen is weak because oil and many other commodities are priced in dollars.
The yen remained near 160 to the dollar, close to levels that have repeatedly raised speculation over currency intervention. The currency’s weakness supports exporters in normal conditions, but on September 2 the negative effect of higher import costs and inflation pressure outweighed the earnings benefit.
A weak yen and rising oil prices are a difficult combination for households. They raise the cost of groceries, gasoline, electricity, transport and imported daily goods. Even with wage growth improving, consumers remain vulnerable to another round of price increases.
The oil shock also complicates Bank of Japan policy. Imported inflation is rising while domestic consumption remains uneven, making it harder for the central bank to judge whether price pressure is being driven by a healthy wage-price cycle or by external cost shocks.
The bond market delivered the second major blow. Japan’s 10-year government bond yield rose as high as 3.01%, its highest level since September 1996. The two-year yield reached 1.83%, the highest since April 1995, as investors priced in faster BOJ normalization.
The move above 3% in the 10-year yield was a major psychological shift. Japan spent decades in an ultra-low-rate environment, and a benchmark yield above 3% changes the way investors think about equity valuations, mortgages, corporate borrowing and government debt-servicing costs.
Higher yields are especially negative for growth stocks and technology shares. They raise the discount rate applied to future earnings, making investors less willing to pay high multiples for companies whose profits are expected several years ahead.
That pressure hit the Nikkei hard because the index is heavily influenced by high-priced technology and semiconductor-related stocks. Advantest, Tokyo Electron, SoftBank Group, Murata Manufacturing, SUMCO, Ibiden, Renesas Electronics, Panasonic Holdings, Kokusai Electric, Taiyo Yuden and Keyence were among the actively traded shares reported lower during the session.
Semiconductor and artificial intelligence-related shares remained at the center of the selloff. The sector had already been volatile after weeks of concern over Nvidia, U.S. technology valuations and the sustainability of AI-related capital spending. The jump in yields gave investors another reason to reduce exposure.
Advantest remained one of the most important names because of its large weight in the Nikkei and direct exposure to advanced chip testing. The stock has benefited from the global AI investment cycle, but it is also highly sensitive to shifts in interest-rate expectations and valuation pressure.
Tokyo Electron also came under pressure as investors sold semiconductor-equipment shares. The company remains central to Japan’s role in global chip manufacturing, but higher yields and caution over capital spending can quickly weigh on the sector.
SoftBank Group weakened as investors reduced exposure to long-duration AI investment themes. The company remains one of Tokyo’s most visible proxies for artificial intelligence through its involvement in OpenAI, robotics, digital infrastructure and other technology platforms, but its strategy also depends on large capital commitments and funding conditions.
Kioxia Holdings was also closely watched as a gauge of memory-chip sentiment. The company has become a barometer of confidence in high-bandwidth memory, AI servers and data-center demand, but its shares have been extremely volatile through August and early September.
The September 2 selloff showed that Nvidia’s strong recent earnings are no longer enough to protect Japan’s AI-related shares when macro conditions turn against them. Investors are now weighing AI demand against higher yields, stretched valuations, funding costs and the possibility that global central banks will tighten policy further.
Nonferrous metals and electronic-component shares also fell sharply. Sumitomo Metal Mining, Mitsubishi Materials, Mitsui Mining & Smelting, Murata Manufacturing, Taiyo Yuden and JX Advanced Metals were among names under pressure as investors sold economically sensitive and technology-linked materials shares.
Automakers also weakened, with Toyota Motor and Honda Motor reported lower during the session. The weak yen normally supports exporters, but the market focused instead on higher oil, rising rates, weaker global risk appetite and concern that U.S. demand could be damaged by higher borrowing costs.
Recruit Holdings, IHI and other large liquid shares also fell, showing that selling extended beyond pure semiconductor names. The market was not simply rotating out of AI into value; investors were reducing risk across many sectors.
The sector picture reflected that broad pressure. Other products, electric appliances, nonferrous metals, services, and securities and commodity futures were among the weaker groups. Mining and marine transportation were among the few areas showing relative strength, supported by higher oil and commodity-related demand.
Energy-related shares were the clearest beneficiaries of the oil shock, but their gains could not offset broader market weakness. Higher crude prices may lift resource companies, but they are negative for most of the Japanese economy.
Shipping shares also attracted some support because geopolitical tension and energy transport disruptions can raise freight rates. However, even that support was limited by the overall risk-off mood.
Banks were caught between two forces. Higher rates can improve lending margins and investment income, but a rapid rise in JGB yields can create valuation losses on bond holdings and increase concern about the broader economy. The sector therefore did not provide the same stabilizing force it had offered during earlier TOPIX rallies.
The BOJ is now facing a more difficult September decision. Markets had already been pricing a possible rate increase at the September 17-18 meeting after the central bank kept its policy rate at 1% in July and board member Hajime Takata dissented in favor of a hike to 1.25%.
Since then, Tokyo inflation, producer prices, the weak yen and rising JGB yields have all strengthened expectations for tighter policy. The two-year yield’s rise to a 31-year high showed that investors increasingly expect the BOJ to move sooner rather than later.
U.S. Treasury Secretary Scott Bessent has also increased pressure on Japanese policymakers by suggesting that the government and BOJ will take steps that lead to a stronger yen. Reuters Breakingviews argued that such comments risk making Japan appear to be ceding policy control to the United States.
That issue matters because the BOJ must avoid the impression that it is raising rates mainly in response to foreign pressure or currency-market demands. Any September hike would need to be framed as a response to domestic inflation, wage growth and price-setting behavior.
At the same time, the yen near 160 and oil near $95 create real domestic inflation risks. If the BOJ waits too long, imported price pressure could spread further into consumer prices and inflation expectations.
Japan’s recent inflation data already point in that direction. Tokyo core CPI rose 1.8% in August, while the index excluding fresh food and fuel reached 2.0%. Producer prices have also remained elevated, showing that companies continue to face strong cost pressure.
For households, the central question is whether wage growth can keep up with daily living costs. Food, energy, gasoline, transport and services remain expensive, and another rise in oil could undo some of the relief from government subsidies.
TV Tokyo’s broader business themes remain closely connected to this market. Companies are trying to pass on higher labor, energy, logistics and materials costs, while consumers are deciding whether pay gains are enough to support discretionary spending.
Firms with pricing power, strong brands or essential products remain better positioned. Import-dependent retailers, logistics firms, utilities, food producers and smaller manufacturers face greater pressure if the yen stays weak and oil remains high.
Fiscal policy is another source of market concern. The 10-year yield above 3% comes just as the government begins the next budget process, with ministries and agencies submitting large spending requests.
The Finance Ministry has been considering a higher assumed interest rate for calculating debt-servicing costs, reflecting the pressure from rising JGB yields. Higher interest costs reduce the room for household relief, defense spending and strategic investment unless the government raises revenue or cuts other spending.
Prime Minister Sanae Takaichi’s administration is trying to balance cost-of-living support with fiscal credibility and long-term investment. The government’s strategy calls for more than 370 trillion yen in public and private investment through fiscal 2040, targeting semiconductors, artificial intelligence, energy security, defense, shipbuilding, robotics, space and other strategic sectors.
That agenda supports many of the companies investors have favored, including semiconductor-equipment makers, materials suppliers, power-system companies, data-center infrastructure firms and defense-related manufacturers. But higher yields make investors more sensitive to how the plan will be funded.
The global backdrop was strongly negative. Reuters reported that Asian stocks slumped after renewed U.S. strikes on Iran pushed oil higher and drove the U.S. 10-year Treasury yield to its highest level in almost three years. South Korea’s Kospi dropped sharply, while broader Asia-Pacific shares also fell.
The South Korean market remains important for Tokyo because overseas investors increasingly treat Japanese chip-equipment makers, South Korean memory producers, Taiwanese foundries and U.S. AI shares as part of one connected technology trade. When Korean semiconductor shares fall, Japanese AI-related stocks often come under pressure quickly.
Federal Reserve expectations added to the pressure. Fed funds futures were pricing about a 67% probability of a 25-basis-point rate increase at the September 16 meeting, up sharply from about 40% a week earlier. That shift supported the dollar, lifted U.S. yields and weighed on growth shares globally.
A more hawkish Fed makes Japan’s policy challenge harder. Higher U.S. rates keep pressure on the yen, while a weaker yen raises import costs and increases pressure on the BOJ to respond. If both the Fed and BOJ are expected to tighten, global equities face pressure from rising discount rates.
Global bond markets were under strain. Reuters reported that the bond selloff deepened as inflation risks and oil prices jolted markets, with investors increasingly worried that governments will need to pay more to finance debt in a world of sticky inflation and higher energy costs.
That concern is especially relevant to Japan because of its large public debt and rising budget requests. A sustained rise in JGB yields would change assumptions that have guided fiscal planning for years.
The September 2 market reaction was therefore not just a one-day stock selloff. It reflected a broader reassessment of the investment environment: higher oil, higher yields, weaker currencies, more hawkish central banks and less tolerance for expensive growth stocks.
What to watch next: whether the Nikkei can hold above 64,000 after its 1,889-point fall, whether TOPIX can stabilize after ending its nine-day winning streak, and whether bargain buying returns to semiconductor and AI-related shares.
Investors will monitor Advantest, Tokyo Electron, SoftBank Group, Kioxia, Fujikura, Furukawa Electric, Ibiden, Murata Manufacturing and Taiyo Yuden for signs of whether the AI selloff is stabilizing or deepening.
The 10-year JGB yield above 3% is now the most important domestic signal. If it keeps rising, pressure could intensify on equity valuations, mortgages, fiscal policy and the government’s budget process. If it retreats below 3%, investors may regain some confidence in risk assets.
The yen near 160 to the dollar remains another critical marker. A clear move beyond 160 would revive intervention speculation and increase pressure on the BOJ to raise rates in September.
Oil near $95, Middle East developments, U.S. jobs data, next week’s U.S. producer and consumer price reports, comments from BOJ Governor Kazuo Ueda and Finance Minister Katayama, and the September 17-18 BOJ meeting will shape the next stage of trading.
September 2 showed that Tokyo’s market remains highly exposed to global macro shocks. The Nikkei’s sharp fall reflected not only technology weakness, but also a deeper concern that rising oil prices, higher bond yields and a weak yen could force central banks into tighter policy just as investors are questioning the durability of the AI trade.
