Asian stock markets were generally under pressure on Thursday, with Japan and South Korea experiencing the largest declines. Japanese government bond yields rose across the board, coupled with international oil prices climbing above $100 per barrel and ongoing tensions in the Middle East, which drove regional markets towards safe-haven assets.

Japanese and Korean stocks both tumbled simultaneously

The Nikkei 225 index tumbled 2.9% at one point, while the South Korean Composite Index fell by 2.4%. Japanese stocks have been on the decline for three consecutive trading days, during which the total market value of the Japanese stock market has evaporated by over 35 trillion yen, which is approximately 225 billion US dollars.

The market pressure is mainly concentrated on interest rate-sensitive assets. As bond yields rise rapidly, investors' concerns about financing costs and valuation pressures have also increased, leading to a clear decline in risk appetite.

Japanese government bond yields continue to rise

Japanese government bond yields have risen across the board, with the yield on 30-year Japanese government bonds climbing to 4.055% and the yield on 10-year bonds rising to 2.965%. The simultaneous increase in long-term and benchmark maturity yields indicates that the market is once again factoring in higher expectations for policy interest rates.

Currently, about 97% of economists expect the Bank of Japan to raise interest rates to 1.25% at its meeting on September 18. Before the announcement of the interest rate decision, the volatility in the bond market had already spread to the stock market.

Oil prices and the worsening situation in the Middle East increase pressure

In addition to interest rate factors, the price of crude oil exceeding $100 per barrel has also heightened market concerns about inflation and corporate costs. At the same time, the escalating tensions in the Middle East have further dampened sentiment in the Asian markets.

Under the combined influence of multiple factors, regional funds are more inclined to reduce their risk exposure. In the short term, the outcome of the Bank of Japan's meeting and the subsequent trend in bond yields will continue to be the focus of attention in the Asian market.