TOKYO - Tokyo stocks fell sharply on July 2 as a global reversal in semiconductor and AI-related shares dragged the Nikkei 225 below 70,000, while the broader TOPIX held firm as investors rotated into banks, software, airlines, trading houses and other lagging value shares.
The Nikkei 225 Stock Average closed at 68,733.15, down 1,741.81 points, or 2.47%, finishing at the day’s low after briefly trading above 70,000 in the morning. The decline marked the index’s first drop in four sessions and its first close below 70,000 since June 29.
The broader TOPIX ended slightly higher, extending its winning streak to four sessions and holding above the 4,000 mark. The split between the two indexes showed that the day’s selling was concentrated in semiconductor and AI-related shares rather than spread evenly across the market.
Nikkei CNBC and NQN framed the session as a sharp reversal in the AI trade after the Philadelphia Semiconductor Index fell 6% in the United States. Investors took profits in chip and AI-related shares that had led the first-half rally, with position adjustments and quarter-end rebalancing also adding to volatility.
Selling pressure intensified in Tokyo after South Korea’s benchmark Kospi index plunged more than 7%, deepening concerns that the global AI and semiconductor trade was entering a correction. Analysts said the Nikkei’s 25-day moving average, around the 68,200 level, was acting as near-term support, but the weak close suggested market sentiment remained fragile.
Kioxia was one of the main drags on the market, extending its fall from a June high above 110,000 yen to around 75,000 yen, a drop of more than 30%. The memory chipmaker was hit by weakness in U.S. peer SanDisk and concerns that supply-demand conditions may be changing after a powerful rally in memory-related shares.
Tokyo Electron, Advantest and Taiyo Yuden also came under heavy selling pressure. Taiyo Yuden fell about 10% after hitting a record high the previous day, with investors questioning valuations after its price-earnings ratio rose to nearly 150 times.
SoftBank Group moved against the broader trend, rebounding from early losses and rising during the session. Market participants cited reports related to OpenAI, including speculation around its planned listing and proposals involving the Trump administration, as factors supporting buying in SoftBank shares.
The day’s market breadth was stronger than the Nikkei’s headline fall suggested. On the Tokyo Stock Exchange Prime Market, 1,157 stocks rose while 375 declined, with trading value reaching 9.0987 trillion yen. The large turnover reflected active switching out of crowded semiconductor names and into lagging sectors.
Software and systems-related shares attracted renewed buying in what analysts described as a return-reversal trade. NEC, Fujitsu and Nomura Research Institute rose as investors bought back names that had lagged while money concentrated in semiconductor shares. In the United States, Microsoft and Salesforce also gained, helping support interest in software names in Tokyo.
Airline shares also advanced after Nomura Securities upgraded Japan Airlines and ANA Holdings to buy, citing improving profitability from lower fuel procurement costs and continued price increases. Automakers such as Honda were supported by the weak yen, while trading houses including Mitsui & Co. and Marubeni drew buying after reports that Berkshire Hathaway had increased its holdings in Japanese trading companies.
The yen remained under close watch after recently weakening to its lowest level in about 40 years. The dollar traded around the 161-yen range, keeping markets alert for possible intervention by the Ministry of Finance. A sudden yen rebound earlier in the session fueled speculation that authorities may be testing or warning the market, although no official confirmation was given.
Japanese government bond yields continued to rise, with the long-term yield reaching 2.770%, around its highest level in about a month and a half. The move reflected expectations that the Bank of Japan may continue raising rates after lifting its policy rate to 1% in June, while persistent yen weakness and inflation pressure keep policymakers under scrutiny.
On the policy front, Toshihiro Nagahama, a member of the government’s top economic council and an adviser close to Prime Minister Sanae Takaichi, told Reuters that the BOJ should raise rates moderately to address excessive yen weakness, suggesting two further increases at six-month intervals toward a neutral rate of about 1.5%.
The global backdrop remained unsettled. U.S. high-tech shares weakened sharply, semiconductor stocks fell across Asia, and investors awaited U.S. employment data due later in the day. The jobs report is being released on Thursday this month because of the U.S. Independence Day holiday, and markets expect employment growth to slow from May.
A weaker-than-expected U.S. jobs report could reduce expectations for further Federal Reserve tightening and support stocks, while a strong reading could push U.S. yields and the dollar higher again, adding pressure on the yen and Japanese bond markets.
Oil prices fell to their lowest level since late February, easing some pressure on import-dependent Japan and supporting airlines and other fuel-sensitive sectors. However, the weak yen continues to raise the cost of imported energy, food and raw materials, leaving households and companies exposed to price pressures.
The main points to watch next are whether Kioxia and other semiconductor shares stabilize, whether the Nikkei’s 25-day moving average holds as support, whether TOPIX continues to benefit from rotation into value shares, and whether the yen’s weakness forces stronger verbal warnings or action from Japanese authorities.
For Tokyo investors, the key question is whether July’s correction becomes a healthy rotation away from overheated AI names into broader sectors, or whether the semiconductor unwind deepens enough to pull the wider market lower.
Source: 日経CNBC 公式チャンネル
