Japanese shares give up gains on rising U.S. bond yields


TOKYO, Jan 18 (Reuters) - Japanese shares reversed course to close lower on Tuesday, as a jump in U.S. bond yields made investors cautious, prompting a sell-off in market heavyweights.

The Nikkei share average (.N225) fell 0.27% to 28,257.25, after rising as much 0.9% earlier in the session. The broader Topix (.TOPX) dropped 0.42% to 1,978.38.

"Sentiment was weakened by rising U.S. Treasury yields. Investors thought the U.S. market would fall this evening," said Shoichi Arisawa, general manager of the investment research department at IwaiCosmo Securities, adding mixed messages from the Bank of Japan after its policy meeting also weighed.

The Bank of Japan upgraded its inflation forecasts and flagged heightening chances the recent commodity-driven price hikes will broaden, the latest sign of its conviction Japan is emerging sustainably out of deflation. read more

U.S. Treasury yields jumped along the curve during Asian trading hours, lifting the shorter end to new pandemic highs, as traders braced for the possibility of a hawkish surprise from the Federal Reserve.

Benchmark 10-year yields rose more than 6 basis points to 1.8550% and Fed funds futures dived as markets baked in a hike in March and three more by the end of the year.

Japanese shares traded in positive territory earlier in the session, tracking a solid finish overnight in European markets. read more

Uniqlo clothing store owner Fast Retailing (9983.T) ended 2.37% higher, while chip-making equipment maker Tokyo Electron (8035.T) edged up 0.08%. Technology start-up investor SoftBank Group (9984.T) gave up its gains to fall 0.4%.

Japanese railway operators (.IRAIL.T) climbed 0.59% even as Tokyo and its surrounding prefectures have sought further measures from the central government to help counter rising COVID-19 infections. read more

But airliners (.IAIRL.T) gave up early gains to end 0.62% lower.

Steel makers were the worst performers on the Nikkei, with Nippon Steel tanking 7.08%, JFE Holdings (5411.T) dropping 6.78% and Kobe Steel (5406.T) falling 6.8%.

Reporting by Junko Fujita; Editing by Sherry Jacob-Phillips and Subhranshu Sahu

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