The Nikkei fell 255 points or 0.7% to close at 37,499 on Monday, retreating after a flat finish in the prior session, while the broader Topix edged down nearly 0.1%, marking its second consecutive muted performance as global risk appetite weakened.
Shares in Japan close by 0.7% lower
The downturn followed a sharp drop in U.S. equity futures after Moody’s downgraded the U.S. credit outlook, stoking concerns over global financial stability and prompting a rotation out of risk-sensitive assets. The downgrade, attributed to persistent fiscal deficits and political dysfunction, fueled speculation of rising bond yields and tighter financial conditions in the months ahead.
Adding to the cautious tone, the White House intensified trade rhetoric, with Treasury Secretary Jennifer Bessent warning that countries unwilling to cooperate in upcoming negotiations could face maximum tariff enforcement. The comments placed renewed pressure on U.S.-Japan trade talks, as Japanese officials seek to secure a comprehensive agreement by June, with particular focus on auto exports, digital trade, and agricultural access. Market participants fear that the hardline stance could stall progress and further weigh on Japan’s trade-dependent economy.
Weak Chinese data hit investor sentiment
Meanwhile, investor sentiment was also impacted by weak economic data out of China, Japan’s largest trading partner. April figures revealed slower-than-expected growth in Chinese industrial production and retail sales, underscoring fragility in post-COVID demand and casting doubt on the strength of the region’s recovery.
In terms of individual stocks, Fast Retailing fell 1.1%, exerting the largest downward pressure on the Nikkei as investors rotated away from consumer discretionary names. Semiconductor-related shares were also among the notable laggards, with Advantest dropping 1.4% and Tokyo Electron falling 1.2%, in tandem with a global decline in chipmakers after signs of softening demand and margin pressure.
On the upside, Daiichi Sankyo surged 6.6% to lead the gainers, driven by reports of strong clinical trial results for its new oncology drug pipeline and potential partnership interest from major U.S. pharmaceutical firms. The stock’s rally provided a significant offset to the broader index losses and highlighted renewed investor interest in defensive and healthcare-related plays amid market volatility.
Looking ahead, traders will be closely monitoring key data releases later this week, including Japan’s GDP figures and updates from the Bank of Japan, for further insight into the country’s monetary and fiscal policy direction.
