Asian stock markets started the week on a cautious footing, with most major indices edging lower as currency dynamics and global trade tensions unsettled investor confidence. The standout move came from Japan, where a sharp appreciation in the yen against the U.S. dollar triggered a selloff in export-heavy equities, underscoring how sensitive regional markets remain to foreign-exchange shifts and policy uncertainty.

Japan Bears the Brunt of Yen Strength

Japan’s benchmark Nikkei 225 fell nearly 2%, marking one of its steepest daily declines in recent weeks. The move was closely tied to the yen’s sudden strength, which undermines the earnings outlook for globally exposed manufacturers. Exporters such as Toyota Motor came under pressure as investors reassessed profit expectations that had previously benefited from a weaker currency.

A softer yen typically inflates the value of overseas revenues when translated back into local currency. The recent reversal, driven by signals that Japanese and U.S. officials are prepared to intervene to stabilize the yen, has forced markets to unwind positions that were built on prolonged dollar strength. The psychological impact has been just as important as the mechanical one, with traders wary that further currency intervention could add volatility to already stretched equity valuations.

Mixed Performance Across the Region

Elsewhere in Asia, declines were more muted. South Korea’s Kospi slipped modestly, reflecting caution around global growth and technology demand. In China, markets were more resilient, with Hong Kong’s Hang Seng Index hovering near flat while the Shanghai Composite posted slight gains.

This divergence highlights a broader theme in Asian markets: domestic policy support in China continues to cushion sentiment, while export-driven economies such as Japan and South Korea remain more exposed to currency swings and global trade frictions. Several regional markets, including Australia and India, were closed, limiting broader participation and liquidity.

Global Trade and Wall Street Spillovers

U.S. futures pointed lower, adding to Asia’s cautious tone. Persistent uncertainty around American tariff policy remains a key overhang, particularly for economies deeply integrated into global supply chains. Recent rhetoric around potential new tariffs and retaliatory measures has reinforced a sense of policy unpredictability, making investors more defensive.

The weakness followed a mixed session on Wall Street, where gains in technology shares were offset by sharp declines in select industrial names. Elevated U.S. equity valuations have left markets vulnerable to negative surprises, and Asian investors are increasingly sensitive to signals from U.S. monetary and trade policy ahead of the Federal Reserve’s next rate decision.

Safe-Haven Assets Steal the Spotlight

While equities struggled, precious metals surged. Gold and silver posted strong gains, reflecting growing demand for perceived safe havens amid currency volatility and geopolitical uncertainty. The move suggests that investors are not merely rotating within equities, but actively reducing risk exposure across portfolios.