Japan's stocks, bonds, and yen rally on Mideast ceasefire declaration

By Rocky Swift and Satoshi Sugiyama

TOKYO, April 8 (Reuters) - Japan's blue-chip share average jumped by the most in a year, while the country's bonds and currency rallied on Wednesday, as the U.S.-Iran ceasefire agreement drove crude oil prices sharply lower and eased concerns of an economic slowdown.

The Nikkei 225 Index .N225 rose 5.39% to 56,308.42, climbing for a fourth straight day to hit its highest close since March 2. The yield on the benchmark Japanese government bond (JGB) JP10YTN=JBTC fell 4 basis points (bps) to 2.365% after hitting a 27-year high on Tuesday.

More than five weeks after the U.S. and Israel began aerial bombardments of Iran, U.S. President Donald Trump said he had agreed to a two-week halt of hostilities just before a deadline he had set for Tehran to reopen the critical oil shipping lane of the Strait of Hormuz.

Iran's Supreme National Security Council portrayed the deal as a victory, claiming Trump had accepted Iran's conditions for the pause.

Pakistan's role as an intermediary between the U.S. and Iran gives the agreement a degree of credibility, contributing to market optimism, said Shingo Ide, chief equity strategist at NLI Research Institute.

"Pakistan reportedly asked Iran to lift the closure of the Strait of Hormuz, and it seems that the blockade was in fact lifted," Ide said. "There is growing hope that, if things continue this way beyond those two weeks, it could effectively transition into a real ceasefire."

U.S. crude futures sank more than 19% at one point to below $100 per barrel, while the yen strengthened to a more than two-week high of 158.05 per dollar. Japan's economy is particularly vulnerable to oil prices because of its heavy reliance on imported energy.

The Nikkei's gain on Wednesday was the steepest since April 10, 2025, when the index had surged 9% following a policy backtrack by Trump on his massive "Liberation Day" tariff plan.

JGB yields have surged during the crisis as concerns mounted that inflation pressures will spur the Bank of Japan to accelerate rate hikes and compel the government to expand stimulus.

Interest rate swaps on Wednesday pointed to a near 52% chance of a BOJ interest rate hike this month, down from about 60% earlier this week, LSEG data showed.

Companies related to semiconductors and the artificial intelligence sector, which has enormous energy demand, were the sharpest gainers among Japanese equities. Among Topix sub-sectors, mining and shipping were the biggest decliners.

The largest percentage gainers in the Nikkei were chipmaker Kioxia Holdings 285A.T, up 18.6%, followed by Furukawa Electric 5801.T, gaining 17.6%, and Advantest 6857.T, which soared 13.6%.

Oil explorer Inpex 1605.T sank 6.2%, leading decliners, followed by Idemitsu Kosan 5019.T, down 5.9%, and shipping line Kawasaki Kisen 9107.T, which sank 3.9%.

"It remains unclear whether crude prices and supply will return to pre-conflict levels," said Maki Sawada, an equities strategist at Nomura Securities.

"Given this lingering uncertainty, I believe there is a strong possibility of a pullback following this sharp rise."