Japan’s Nikkei share average was headed for its worst week in nearly three months on Friday, as investor concerns over aggressive interest rate hikes prompted heavy selling worldwide, with a weaker yen providing only a smidgen of comfort.

The Nikkei was down 0.2% at 27,604.37 by the midday break and has lost 3.6% this week. The broader Topix fell 0.5% and had touched a six-week low of 1,926.05 in morning trade. The index lost 2.7% so far this week.

Market expectations for U.S. interest rates have crept steadily higher – hurting appetite for stocks – since last week’s speech from Federal Reserve chair Jerome Powell, who reiterated his focus taming inflation above all.

“Many people in the equity markets, including Japan, now think that the upside is very limited, because of that (hawkish) stance of the Federal Reserve,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management in Tokyo.

Tech firms have faced a particular clobbering from the rate-hike view, and the sector was the largest drag on the broader market on Friday.
Shares of Trend Micro fell 2.7% and have lost more than 8% for the week, as the cybersecurity firm recoils from a two-decade high scaled last month.

Department store operator Isetan Mitsukoshi rose 3%.

Top movers included gaming company Nexon, which dropped about 5% and touched a six-month low after reporting quarterly earnings on Thursday.

Focus has shifted to U.S. labour data due later on Friday, which if strong could reinforce expectations that the Fed hikes rates by a steep 75 basis points later in September, and on the currency market where the yen is wallowing at a 24-year low.

“Of course, a weakened yen has been helping the profits of the exporting companies,” said Sumitomo’s Kichikawa.

“But it’s not clear whether the yen weakness is positive for the economy and equity pricing in Japan because at the moment, Japan’s trade balance is in the negative territory.”

Reuters