Nikkei slides on rate hike expectations

Japan's Nikkei share average fell nearly 2% on Monday, driven by growing expectations of interest rate hikes by major central banks to contain inflation. The benchmark Nikkei 225 dropped 97% to 63 in early trading, while the broader Topix slipped 84% to 71.

The decline came after Wall Street's main indexes ended lower last week, following Federal Reserve Chair Jerome Powell's reiteration of the central bank's focus on fighting inflation, which increased prospects for a S. interest rate hike.

Bank of Japan rate hike bets

Markets have priced in a near certainty that the Bank of Japan will raise rates at its meeting next month. Japanese government bond yields rose to fresh multi-decade highs on Monday, reflecting growing expectations for tighter monetary policy.

Takayuki Miyajima, senior economist at Sony Financial Group, said in a note that "in addition to last week's decline in S. stocks, growing expectations of S. interest rate hikes following remarks by Fed Chair Jerome Powell are likely to weigh on investor sentiment." He added that "financial stocks may see buying interest driven by expectations of rising domestic interest rates, and the Topix is expected to hold up better than the Nikkei 225."

Market breadth and notable movers

On the Nikkei 225, there were 70 advancers against 150 decliners and five unchanged. The largest losers were Advantest, down 7%, followed by Mitsubishi Materials, which dropped 37%, and Japan Steel Works, which lost 38%. Among the gainers, Kansai Electric Power rose 22%, followed by Tokai Carbon, which advanced 08%, and JTEKT, which gained 10%.