On August 19, the Nikkei 225 index experienced a decline for the second day in a row, with chip-related stocks bearing the brunt of the pressure. The sharp rise in bond yields has intensified market anxieties regarding the risks associated with AI-driven trading, subsequently diminishing investors' appetite for risk. At the market's opening, the Nikkei 225 index plummeted by over 3%, a downturn led by memory chip manufacturer Kioxia Holdings and fiber-optic cable producer Furukawa Electric.

The TOPIX index also witnessed a significant drop, at one point sliding 2.8%, dragged down by the underperformance of electronics and banking stocks. The lead strategist at Daiwa Asset Management pointed out that escalating yields would drive up borrowing costs for hyperscale cloud service providers. This, in turn, casts doubt on the future outlook for capital expenditures and could potentially impact infrastructure companies that have been riding the wave of the AI investment boom.

On Tuesday, Japan's 10-year government bond yield surged to its highest level since 1996, sparking speculation that the Bank of Japan might hike interest rates next month. In tandem, the 10-year U.S. Treasury yield also neared its peak since early 2025, further exacerbating market concerns.