Still, losses in Asian markets were less pronounced on Wednesday than earlier in the week, as steep declines in valuations also spurred bargain buying

Most Asian stocks dropped on Wednesday, extending recent declines amid heightened geopolitical uncertainty. Brewing concerns over weak fiscal conditions in some countries, specifically Japan, also weighed on markets.

Still, losses in Asian markets were less pronounced on Wednesday than earlier in the week, as steep declines in valuations also spurred bargain buying.

Nikkei 225 dropped 0.4%, while the TOPIX index declined almost 0.9%.

Markets were spooked by an accelerating selloff in Japanese government bonds over the past week, amid concerns over increased fiscal spending and tax cuts under Prime Minister Sanae Takaichi.

Of particular concern was Takaichi’s proposed two-year suspension on an 8% sales tax on food and beverages, which OCBC analysts said could cost nearly 0.75% of Japan’s gross domestic product in lost revenue.

Japan is in denial. If you think you can campaign on an end to “excessive” austerity with debt at 240% of GDP, markets will teach you a harsh lesson, Robin Brooks, former Chief FX Strategist at Goldman Sachs said in a social media post.

Yields on 10-year Japanese government bonds surged to their highest levels in 27 years of recorded data this week, reflecting increased investor anxiety over Japan’s fiscal prospects.

The scale of the bond selldown was so large that Japanese authorities advised markets to remain calm.

Broader Asian markets mostly retreated as global geopolitical uncertainty remained in play.

ASX 200 declined 0.4%, while Straits Times index dropped 0.6%. Hang Seng index declined 0.2%.

KOSPI shed 0.8%, retreating from record highs hit earlier this week. But Hyundai Motor – a key driver of the KOSPI’s recent rally – soared 10% as investors remained upbeat on the automaker’s prospects in physical artificial intelligence and robotics.

Chinese markets outperformed, with the mainland Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rising 0.7% and 0.4%, respectively.