Japan Nikkei Rises as Treasury Yield Stress Eases

For investors, the key question is whether the rally can extend beyond a relief bounce. The Nikkei’s advance pushed the index to 70,037.61 in the underlying futures-linked data, keeping it well above both its 50-day and 200-day moving averages and leaving momentum technically positive, even if the relative strength index at 70.9 points to a market that is no longer cheap. The iShares MSCI Japan ETF, EWJ, also edged higher to 98.92 in recent trading, while the China-heavy FXI has continued to lag, underscoring how selective the regional bid remains.

The backdrop is still dominated by the bond market. Last week’s climb in 10-year Treasury yields to multi-decade highs rattled equities, but softer-than-expected US payrolls data eased fears of another immediate Federal Reserve hike and helped the Nasdaq hit a record intraday high. That combination — stronger tech risk appetite, but persistent rate anxiety — is now shaping Asian trading as well, especially for export-heavy markets like Japan that benefit from a weaker yen but are sensitive to global growth expectations.

With China and Korea closed, the session also lacks the usual regional cross-currents, making Japan the clearest gauge of sentiment. The more important test comes later this week, with the Fed’s September minutes, US services data and consumer sentiment all due, along with the unofficial start of earnings season. If yields keep rising, the market will have a harder time sustaining the kind of broad advance seen in Tokyo; if they stabilize, Japan’s large-cap exporters and global cyclicals could stay in favor.

For now, the message from Asia is that investors are willing to buy dips, but not yet ready to declare the bond-driven selloff over.