Asian equity markets turned broadly negative on Monday as geopolitical concerns over Iran and comments from the Bank of Japan combined to sap investor appetite for risk. Japanese shares bore the brunt of the selling after the BOJ signaled vigilance toward currency-driven inflationary pressures, while technology stocks across the region also retreated following recent gains.
Market momentum was uneven coming into the Asian session after Wall Street closed lower on Friday, and S&P 500 futures slipped slightly by 23:43 ET (03:43 GMT). Some near-term relief was evident after President Donald Trump said talks with Iran were going well, but the overall tone in Asian trading remained cautious.
Japan at the epicenter of the move
Japan’s Nikkei 225 and TOPIX indexes were among the weakest performers in Asia, each falling by in excess of 3%. The outsized drop followed testimony by Bank of Japan Governor Kazuo Ueda in parliament in which he said the central bank was monitoring yen movements closely and warned that a weaker currency - by increasing import costs - could lead to more interest rate increases down the line.
Ueda said the BOJ will "guide policy appropriately" by scrutinizing currency moves and their economic impact. While he did not explicitly announce imminent rate hikes, his comments echoed previous signals from BOJ officials that a tightening of policy could occur as inflation and growth firm.
Technology sector retreats
Tech-heavy indices in the region fell, mirroring losses seen among U.S. peers amid a mix of profit-taking and questions about the durability of AI-driven demand. South Korea’s KOSPI, which carries significant technology exposure, slid about 3%, while Hong Kong’s Hang Seng dropped around 1%. Those declines also contributed to pressure on Japanese stocks.
Major Korean memory chip makers extended last week’s weakness. Samsung Electronics Co Ltd (KS:005930) declined 2.5% and SK Hynix Inc (KS:000660) fell 4.8%, moves investors attributed to uncertainty after Google unveiled a new compression algorithm that created questions about long-term AI demand for memory. The losses in these names spilled over into broader chipmaking shares, and investors were observed locking in profits following a prolonged run-up in AI-related stocks.
Geopolitical risks and energy prices
Beyond market dynamics tied to monetary policy and technology, uncertainty over the Iran conflict continued to weigh on sentiment. Over the weekend, hostilities broadened when the Yemen-based, Iran-backed Houthi group attacked Israel, a development that raised the prospect of an expanded front in the conflict. President Trump said talks with Iran were ongoing and that a deal might be close, but offered no definitive signals that would remove investor unease.
Oil prices continued to push higher on Monday, reinforcing concerns about energy-driven inflation and the potential for economic disruption. That move in commodities added another layer of caution across markets sensitive to input-cost pressures.
Other regional markets
- China’s Shanghai Shenzhen CSI 300 and Shanghai Composite traded in a narrow range.
- Australia’s ASX 200 declined 0.8%.
- Singapore’s Straits Times was essentially flat.
- India’s Nifty 50 fell 0.8% in morning trade.
Overall, the session combined central bank communication, profit-taking in technology, and renewed geopolitical tensions to create a broadly risk-averse environment across Asian equity markets.