Japan’s startup stocks are on the verge of their longest losing streak in years, with investors bracing for potential rate hikes by the Bank of Japan. Market sentiment remains cautious as higher interest rates could increase borrowing costs and weigh heavily on growth-focused companies. The Tokyo Stock Exchange Mothers Index has already slumped 15% this quarter, reflecting growing concerns over the central bank’s potential shift away from its ultra-loose monetary policy.
The selloff is driven by rising global yields, with Japan’s startups particularly vulnerable due to their reliance on funding. Analysts warn that a tightening monetary stance could further suppress valuations, leaving growth companies in a precarious position. Investors have been rotating into safer assets, spurred by signals of economic tightening and elevated inflationary pressures worldwide.
Despite the current rout, some analysts believe the downturn may present a buying opportunity for risk-tolerant investors. Historically, growth stocks have rebounded after steep corrections, particularly in sectors with strong long-term fundamentals. However, caution prevails as global economic conditions remain unpredictable, and Japan’s monetary policy could evolve more aggressively than expected.
The Bank of Japan’s upcoming policy meeting is seen as a critical moment for markets, with speculation mounting over the likelihood of a rate adjustment. Any shift could set a precedent for further tightening measures, adding pressure to the already battered startup sector. The broader market impact will depend on how investors digest the central bank’s stance and its implications for Japan’s economic outlook.
