Nikkei 225 Drops 0.2% as Electronics, Real Estate Sectors Sell Off

The Nikkei 225 index closed down 0.2% at 39,819.11 points, weighed down by declines in the electronics and real estate sectors. Meanwhile, the KOSPI index in South Korea ended the day down 0.1% at 3,188.07 points. The yield on Japan's 40-year government bonds fell 8 basis points to 3.295%, while the 10-year yield decreased by 3.5 basis points to 1.520%.

The decline in the Nikkei 225 index was primarily driven by the electronics and real estate sectors, which experienced significant sell-offs. This downward trend was likely influenced by broader market sentiment and sector-specific factors. The real estate sector, in particular, has been under pressure due to concerns over rising interest rates and their impact on property values. The electronics sector, on the other hand, faced challenges related to supply chain disruptions and increasing competition.

The KOSPI index in South Korea also experienced a slight decline, closing down 0.1% at 3,188.07 points. This modest decrease can be attributed to various factors, including global economic uncertainties and domestic market dynamics. The South Korean market has been navigating through a period of volatility, with investors closely monitoring economic indicators and geopolitical developments.

The yield on Japan's 40-year government bonds fell 8 basis points to 3.295%, reflecting a shift in investor sentiment towards safer assets. This decline in yields indicates that investors are seeking stability amidst market uncertainties. Similarly, the 10-year government bond yield decreased by 3.5 basis points to 1.520%, further highlighting the cautious approach adopted by investors.

Japan's June consumer price index showed a slight decrease, which is a positive development for policymakers grappling with uncertainty in trade prospects. The core consumer price index, which excludes volatile fresh food prices, rose 3.3% year-on-year, down from 3.7% in May. This data aligns with economist predictions. Energy prices increased by 2.9% year-on-year, while food prices, excluding fresh food, rose by 8.2%, slightly higher than the 7.7% increase in May. Despite persistent inflation eroding consumer purchasing power, the Bank of Japan is unlikely to raise interest rates immediately due to concerns over the impact of potential U.S. tariff hikes on the economy. The Bank of Japan's Policy Board is scheduled to release its latest price forecasts later this month, with many economists expecting the central bank to maintain its current policy stance.

Japan has emphasized to the G20 that tariffs are not an effective solution for addressing trade imbalances, urging affected countries to address the issue through domestic efforts. The finance minister stated that tariffs are not a viable tool for resolving excessive current account imbalances. The minister highlighted the importance of an open, free, and multilateral trading system, as well as predictable economic management. However, there was no specific discussion on cooperation to counter U.S. policies. The minister also cautioned against excessive volatility in the foreign exchange market driven by speculative factors.