Asian stocks drop, Japanese shares lead losses

Nikkei 225 and TOPIX indexes were the worst performers in Asia, losing over 3% each

Asian stocks dropped on Monday as markets remained largely on edge over an escalation in the U.S.-Israel war on Iran, with Japanese shares leading losses after the Bank of Japan suggested that interest rates could rise in the coming months.

Nikkei 225 and TOPIX indexes were the worst performers in Asia, losing over 3% each.

Outsized losses in Japanese markets came after BOJ Governor Kazuo Ueda told parliament that the central bank was closely watching moves in the yen, and suggested that rising import costs due to a weak currency could invite more interest rate hikes.

Ueda said the bank will “guide policy appropriately” by scrutinizing currency moves and their impact on the economy.

While the BOJ governor did not directly signal any future rate hikes, his comments come after several prior instances of BOJ officials signalling that rates will rise as inflation and growth pick up.

Asian tech stocks dropped across the board on Monday in a mix of profit-taking and concerns over the impact of AI.

The tech-heavy KOSPI and Hang Seng indexes declined nearly 3% and 1%, respectively, while losses in tech also weighed on the Nikkei.

South Korean memory chip makers Samsung Electronics Co Ltd and SK Hynix Inc slipped 2.5% and 4.8%, respectively, extending deep losses from last week.

Losses in the two spilled over into broader chipmaking stocks, while investors also locked in profits in tech stocks after AI-linked optimism drove years of strong gains.

Shanghai Shenzhen CSI 300 and Shanghai Composite indexes moved in a tight range. ASX 200 declined 0.8%, while Straits Times was flat.

Beyond tech, Asian stocks continued to be bogged down by uncertainty over the Iran war.

Oil continued to push higher on Monday, driving concerns over energy-driven inflation and economic disruption.