TOKYO - The Nikkei Stock Average surged past 71000 on Thursday, closing at a record high for the fourth straight session, as easing tensions in the Middle East lifted investor sentiment while the yen weakened to a nearly two-year low against the dollar.
Broad buying spread across the Tokyo market from the opening bell, with the Nikkei at one point rising nearly 1500 yen. Investors were reassured after the United States and Iran signed and put into effect a memorandum aimed at ending hostilities, triggering buy orders across a wide range of shares.
AI and semiconductor-related stocks that have a large influence on the Nikkei, including SoftBank Group, also advanced, helping the index close above 70000 for the first time. The Nikkei ended up 1151.24 yen at 71153.49, renewing its all-time high for the fourth straight trading day.
Topix also rose for a sixth straight session and set a record high for the second consecutive day, trading in the 4000 range. On the Tokyo Stock Exchange Prime Market, trading value reached 10.5419 trillion yen. Advancers accounted for 64% of listed Prime shares, with 1000 stocks rising and 527 falling.
The rally came despite weakness in U.S. stocks after the Federal Open Market Committee’s rate projections revived expectations of another U.S. rate hike this year. U.S. long-term interest rates rose close to 4.5%, while the Dow and other major U.S. indexes declined. In Tokyo, however, the Nikkei remained firm from the futures market and held its gains through the day.
Market participants pointed to several forces behind the unusual strength in Japanese equities. The fall in crude oil prices to a three-month low and the easing of Middle East tensions boosted risk appetite, while strong demand for AI-related shares continued to support the market. Analysts also noted that options trading may have amplified the rise, with large open interest in July Nikkei call options at a 72000 strike price prompting delta-hedging and possibly encouraging a gamma squeeze as market makers bought stock index futures to limit losses on sold calls.
Chip-related shares were particularly active. Kioxia briefly rose to 99500 yen, coming within 500 yen of the 100000 yen mark before losing some momentum. Murata Manufacturing climbed about 18% at one point to a record high after SMBC Nikko Securities raised its investment rating, citing stronger demand for multilayer ceramic capacitors used in AI servers. The brokerage set a target price of 13400 yen, sharply above its previous 4000 yen target. Murata had been trading in the 8000 yen range a week earlier, meaning the stock had gained nearly 50% in roughly one week.
Taiyo Yuden, another multilayer ceramic capacitor-related stock, was weaker after downgrades by brokerage firms. SMBC Nikko Securities cut its rating, saying the stock looked expensive at around 150 times earnings, while Morgan Stanley MUFG Securities had lowered its rating to underweight the previous day, citing a widening gap between the share price and achievable earnings. Even so, the stock briefly rose during trading, suggesting persistent buying interest in the sector.
The market was also supported by reports that Apple is considering product price increases in response to higher semiconductor memory costs. CEO Tim Cook was quoted as saying price hikes were unfortunately unavoidable, underscoring the stronger pricing position of parts and materials suppliers as supply remains tight.
Banks were the strongest sector of the day. Investors focused on the prospect that higher interest rates could improve lending margins and investment income. Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group renewed their record highs, while Mizuho Financial Group traded near levels last seen several years ago. A Nomura Securities survey of individual investors conducted in June also showed strong interest in value stocks, with Kioxia, Toyota Motor and Mitsubishi UFJ Financial Group ranking among names investors were more likely to want to hold.
Automakers were relatively weak despite the yen’s decline. Toyota fell for a third straight session. Market participants said the yen’s renewed weakness could fuel another round of price increases next year, potentially offsetting the benefits of discussions over reduced consumption tax on food and leaving consumers feeling little relief.
In the foreign exchange market, the yen gradually weakened, briefly reaching the 160.70 level against the dollar in morning trading. That was beyond the level where the government and the Bank of Japan intervened in late April, marking the yen’s weakest level in about two years and putting traders on alert for a possible new intervention line.
The trigger was a remark by Federal Reserve Chair Warsh, who said, "Persistently high prices are a burden on the American people." His comments strengthened expectations that the Fed may raise interest rates before the end of the year to contain inflation, prompting investors to buy the higher-yielding dollar and sell the lower-yielding yen.
Analysts said the Nikkei could move toward 72000, a level seen in some market forecasts and linked to options positioning, but warned that a rebound risk could grow if the current momentum stalls. With U.S. interest rates rising again, some market participants said the strength of Japanese stocks appeared increasingly dependent on momentum, Middle East de-escalation, lower oil prices and supply-demand factors rather than fundamentals alone.
Source: TBS
