FX.co ★ Japanese Shares Drop as Yen Surges

The Nikkei 225 Index declined 1.7% to close at 65,269, while the broader Topix Index lost 1.83% to finish at 4,050 on Tuesday, snapping a two-session winning streak as the yen strengthened to its highest level since February. The currency’s appreciation undermined the earnings outlook for Japan’s export-oriented sectors and made domestic assets less attractive to foreign investors by increasing their relative cost.

Investor positioning was also influenced by expectations of a Bank of Japan rate hike, supported by robust economic data: July wages grew at their fastest pace since 1997, and second-quarter GDP was revised higher. At the same time, elevated oil prices amid renewed US-Iran conflict kept inflation and interest rate risks firmly in focus.

Technology shares led the decline, with notable losses in Kioxia Holdings (-3.6%), Advantest (-2%), Taiyo Yuden (-7.9%), Ibiden Co (-6.3%) and Fujikura (-3%).