Tokyo stocks fall as investors weigh inflation and rate path

Japanese stocks fell on Tuesday, pressured by technology shares and concerns over persistent inflation and rising bond yields. The Nikkei index dropped 0.86 percent to 64,360.16 points, while the broader Topix fell 0.95 percent to 4,028.97 points. Investor caution grew over higher borrowing costs affecting AI-related company valuations, with SoftBank Group falling 6 percent as the biggest drag on the Nikkei. A strong auction for 20-year government bonds lowered their yield to 3.71 percent, the lowest since September 9, with bid coverage at 5.84 times. Finance Minister Satsuki Katayama said no decision has been made on funding potential defense spending increases, including a possible corporate tax hike. Japan faces US pressure to raise defense spending to 3.5 percent of GDP, with annual outlays potentially exceeding 10 trillion yen over five years.