Japanese government bond yields are rising and stocks are falling

Yields on Japanese government bonds rose and the Nikkei fell on Wednesday after the Japanese central bank surprised the markets on Tuesday with a change in its policy to control the yield curve.

The benchmark 10-year government bond yield jumped seven basis points to 0.480%, its highest since July 2015 and close to 0.50%, the revised upper end of the Bank of Japan’s policy range.

The Nikkei index closed down 0.68 percent at 26387.72, its lowest closing level since October 13, after volatile trading that briefly witnessed positive performance. The main index lost 3 percent in the wake of the Bank of Japan’s decision, which aims to mitigate some of the costs of long-term monetary stimulus.

The broader Topix index fell 0.64 percent to 1,893.32.

The sub-index of auto manufacturers fell 2.36 percent, topping the losses of the other 32 industrial sub-indices, after the yen rose on the back of the central bank’s move.

As for the banking sector, it rose 2.6 percent, and was the best performer among all sectors, amid expectations that higher interest rates would lead to an increase in profitability. The insurance sector also rose 0.08 percent.