Asian equities came under heavy pressure on Friday as rising global bond yields and elevated oil prices renewed concerns about valuations and inflation. Japan’s Nikkei 225 fell about 0.8% in morning trade, extending its weekly decline to roughly 4.4%, while South Korea’s KOSPI swung around flat after opening 1.35% lower. The moves followed a fresh climb in US Treasury yields, which erased much of the relief from Washington’s decision to expand long-bond buybacks. Brent crude remained above $93 a barrel.
Japan faces an additional domestic test as inflation strengthens before the Bank of Japan’s September 17-18 policy meeting. Core consumer prices rose 1.8% in July, up from 1.6% in June, and inflation excluding fresh food and fuel accelerated to 1.9%. With the BOJ’s policy rate already at 1%, a 31-year high, markets are leaning toward another quarter-point increase. The Nikkei remains vulnerable to higher Japanese rates, elevated US yields and a yen trading near 159 per dollar, a difficult combination for rate-sensitive technology shares.
South Korea’s KOSPI gave back part of its chip-led surge after Thursday’s 5.89% rebound to 6,852.58. SK Hynix’s 40 trillion won share-buyback and cancellation plan had revived confidence in shareholder returns, lifting SK Hynix and Samsung Electronics. But Friday’s early retreat showed how quickly optimism fades when global yields rise. SK Hynix stayed comparatively resilient, helping prevent a deeper selloff. Elsewhere, Taiwan shares edged higher and MSCI’s broad Asia-Pacific index excluding Japan gained about 0.5%.
In the United States, the S&P 500 pulled back from a peak of 7,820 to around 7,640, with the 10-year Treasury yield climbing toward 4.71% and the 30-year approaching 5.25%. Treasury Secretary Scott Bessent has said buybacks of longer-dated debt could exceed the newly announced $4 billion per operation, but investors remain focused on structural problems: US debt has crossed $40 trillion and the budget deficit is running above 6% of GDP. Deutsche Bank strategist Steven Zeng warned that markets may keep resisting policy intervention while debt and deficit fundamentals remain unfavorable. Oil added another constraint, with Brent touching a one-month high of $94.71 and WTI trading near $86.18 as the US-Iran standoff kept the Strait of Hormuz risk premium alive.
Despite the broader risk-off tone, crypto-linked equities outperformed. Coinbase stock surged as investors rotated toward crypto companies, while Bitcoin and altcoins rebounded. The contrasting move highlights a rotation within risk assets even as rising bond yields pressure long-duration equity valuations and global markets remain highly sensitive to fiscal and monetary signals.
