Tokyo's stock market began the week on a downward slope, mirroring a decline on Wall Street triggered by anxieties over slowing global growth fueled by underwhelming earnings reports from major American companies.
The Nikkei 225, Tokyo's benchmark index, shed 1.64% or 647.28 points, opening at 38,876.27. The broader Topix index also dipped, falling 0.93% or 25.35 points to 2,689.10.
This cautious sentiment follows a recent upswing in the market, with some investors taking profits. The negative tone was set by American markets on Friday, after Netflix and American Express unveiled weaker-than-anticipated earnings.
Adding to the pressure were looming concerns about rising inflation and interest rates. The Federal Reserve is anticipated to raise interest rates later in the year to combat inflation, potentially hindering economic progress.
Geopolitical tensions also cast a shadow over the market. The ongoing war in Ukraine and the possibility of further sanctions on Russia continue to be a source of unease for investors.
On an individual stock basis, the decline was widespread. Technology shares, which have been a leading force in the market's recent rally, were among the biggest losers. This reflects the sector's vulnerability to a slowdown in global economic growth, as businesses may cut back on technology spending.
Fast Retailing, which operates the Uniqlo clothing chain, witnessed a 2.35% drop, while Sony Group fell 0.77%. Automakers also felt the pinch, with Nissan and Toyota tumbling 2.29% and 3.58% respectively.
Looking ahead, the trajectory of the Tokyo stock market will likely hinge on developments in the global economy, particularly the performance of major economies like the United States and China. Additionally, how companies navigate the rising interest rate environment will be closely watched by investors.
The Bank of Japan's upcoming monetary policy meeting will also be a key event to monitor. The Bank has so far maintained its ultra-loose monetary policy, but speculation is rising that it might be nearing a policy shift, which could impact the Japanese Yen and in turn, Japanese equities.