Japan’s Nikkei closes lower as chip stocks decline

Japan’s Nikkei closed down more than 1 percent on Tuesday, dragged down by a decline in chip-related heavyweights, but losses were limited as investors bought value stocks for the right to dividends.

The Nikkei index closed down 1.11 percent at 32,315.05 points.

Treasury bond yields continued to rise, reaching their highest levels since October 2007 in Asian trading amid expectations that the Federal Reserve will keep interest rates at high levels for a longer period than initially expected.

Chip-making equipment Tokyo Electron fell 3.7 percent, becoming the biggest drag on the Nikkei index. Advantest, a maker of chip testing equipment, lost 2.24 percent.

The broader Topix index fell 0.57 percent to 2,371.94 points, a smaller decline than the Nikkei index, with investors buying value stocks before the right to dividends expires.

Investors need to buy shares before the next session to obtain dividend rights from companies, which consider September to be the end of the half-year.

Value stocks experience slower growth but tend to pay higher dividends to attract investors, while growth stocks tend to be hurt by higher interest rates because their potential lies in future cash flows.

The pharmaceutical sector fell 1.35 percent, becoming the worst performer among the 33 sub-indices on the Tokyo Stock Exchange.

The shipping companies sector rose 1.62 percent, becoming the best performing sector, while the banking sector advanced 1.13 percent and the insurance sector rose 1.08 percent.