Nikkei falls on higher yields, weak US stocks; retailers sold

2026-08-21

The Nikkei average fell on the Tokyo stock market on the 21st, ending 200 yen lower than the previous day at 66,016. It tracked a drop in US stocks the previous day on rising US long-term yields and traded weak from the start. Selling was especially heavy in some retail stocks, as concern grew over weak household spending.

Higher yields fuel broader selling

By a little after 10 a.m., the Nikkei's losses briefly topped 900 yen. The decline was weighed down by losses across all three major US indexes on the 20th, with the Dow Jones Industrial Average falling more than 700 points. US long-term Treasury yields, which fell on the 19th after the US Treasury announced a doubling of bond buyback cancellations, rose again on the 20th, and expectations for further rate increases remain strong.

Long-term yields also rose in Japan's domestic bond market on the 21st, prompting selling of stocks on concerns that valuations had become relatively expensive. In the market, Hiroshi Namioka, chief strategist at T&D Asset Management, said that even if the latest buyback program were carried out for one year, it would amount to only about 0.2% of GDP, limiting its impact on interest rates. Jun Ishigane, executive fund manager at Mitsubishi UFJ Asset Management, said it was natural for share prices to adjust as Japan's long-term yields approach 3%.

Retail stocks under heavy pressure

The biggest declines were in retail stocks such as Fast Retailing. Fast Retailing fell as much as 5%, Ryohin Keikaku dropped 4% and Asics slid 6%. The trigger was a sharp drop in Walmart shares on the US market on the 20th. The stock at one point fell 10% from the previous day. Although results for the May-July 2026 quarter beat market forecasts for sales and earnings per share, same-store sales growth in the US came in at its weakest level in six years.

Weak consumer spending is also evident in economic data in Japan and the United States. US retail sales in July fell against market expectations, while the preliminary August US consumer sentiment index also missed forecasts. In Japan, the preliminary real GDP reading for April-June showed annualised growth of 1.1% from the previous quarter, falling short of market expectations and highlighting weak consumer recovery momentum. The nationwide consumer price index for July, released by the Ministry of Internal Affairs and Communications on the 21st, rose 1.8% from a year earlier for the overall index excluding fresh food, accelerating from 1.6% in June. Namioka said concerns spread that prolonged inflation would weigh on retailers' earnings.

Investors wait ahead of events

Fast Retailing's forecast price-to-earnings ratio is in the mid-45 times range and Ryohin Keikaku's is in the mid-33 times range, both above the mid-25 times level for the Nikkei sector-based P/E ratio for retailing as of the 20th. With concerns over weakening consumer spending strong, the stocks were in a position where their expensive valuations were more likely to draw attention. The Nikkei average had also undergone a sharp correction earlier in the week, so losses narrowed toward the midday break.

Next week, Nvidia, the US semiconductor giant, is due to announce earnings on the 26th, while the Kansas City Fed's Jackson Hole economic symposium will be held from the 27th to the 29th. At the symposium, FRB Chair Warsh is expected to speak for the first time since taking office, and there was strong caution as investors waited to see the content of his remarks. Depending on the outcome, stock prices could swing sharply, and the market is likely to remain nervous.

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