TOKYO - Tokyo stocks rebounded on July 14 after an early fall of nearly 1,000 points, as investors bought back semiconductor and artificial intelligence-related shares while a recovery in South Korean equities and easing Japanese bond yields helped restore risk appetite.
The Nikkei 225 Stock Average closed at 67,743.50, up 500.77 points, or 0.74%, according to Nikkei Indexes. The index opened lower and briefly fell to 66,268.60 shortly after trading began before reversing course and climbing through the afternoon.
The broader TOPIX rose 31.49 points, or 0.79%, to 4,038.98. Prime Market trading value reached about 10.7628 trillion yen, with 1,185 stocks rising and 327 declining, showing that the rebound spread beyond a narrow group of Nikkei heavyweight technology shares.
Nikkei CNBC and NQN framed the session as another volatile day in the AI trade. Tokyo initially followed weakness in U.S. technology and semiconductor shares, but overseas short-term investors later placed buy orders in stock-index futures and recently sold Japanese technology names. The recovery strengthened as South Korea’s Kospi improved and crude oil futures gave back part of their earlier rise.
The close correlation between Tokyo and Seoul remained one of the market’s main themes. Gains in Samsung Electronics and SK Hynix helped stabilize South Korean shares, encouraging investors to buy Japanese semiconductor and memory-related stocks that had fallen sharply during the recent correction. Market participants said the move looked more like a technical rebound than clear evidence that the AI correction had ended.
Kioxia Holdings and Advantest reversed early losses and advanced as investors bought chip-related shares ahead of quarterly results from ASML and Taiwan Semiconductor Manufacturing Co. The two overseas earnings reports will be closely watched for signs of whether demand for AI chips, memory and semiconductor manufacturing equipment remains strong.
SoftBank Group, Recruit Holdings, TDK and Nitto Denko also rose, contributing to the market recovery. Fast Retailing, Ibiden, Fujikura and Fanuc declined, showing that investors remained selective even as the wider market strengthened.
The yen traded around 162.3 to the dollar, still near its weakest levels in about four decades. Traders remained alert for possible intervention, but the currency market was also focused on government discussion of encouraging state pension funds to hold more Japanese assets.
Japanese government bonds strengthened, easing one of the major sources of pressure on equities. The benchmark 10-year JGB yield fell to around 2.71%, while the 20-year yield dropped sharply after a strong auction. The auction drew firm demand, reinforcing expectations that domestic investors may be willing to absorb longer-term government debt at current yield levels.
The fall in yields reduced some of the immediate momentum behind bank shares, which had benefited from the sharp rise in long-term rates earlier in July. Investors are now balancing expectations that higher rates will improve bank lending margins against the possibility that government measures and pension-fund purchases could prevent bond yields from rising too quickly.
Finance Minister Satsuki Katayama said Japan could consider adjusting state pension-fund asset allocations if the investment environment changed significantly, including through an improvement in the appeal of Japanese assets under the government’s growth strategy. The remarks followed earlier signals that the government wants to encourage major public pension funds to invest more in domestic financial assets.
Health, Labour and Welfare Minister Kenichiro Ueno played down expectations of an immediate shift, saying the investment environment had not diverged significantly from the assumptions behind the Government Pension Investment Fund’s current portfolio. The GPIF is required to manage assets in the interests of pension beneficiaries, limiting the government’s ability to direct its investments.
Even so, the prospect of gradual pension repatriation remains important for markets. Increased domestic bond purchases could help restrain yields, while a shift toward yen-denominated assets could support the currency and reduce some of the pressure created by Japan’s large capital outflows into overseas markets.
Government policy also remained in focus after officials moved to clarify language in the economic policy blueprint related to the Bank of Japan. The final document is expected to reaffirm the BOJ’s legal independence while calling on the central bank to guide policy appropriately toward stable price increases.
The clarification follows a selloff in the yen and government bonds after an earlier draft created concern that the administration could pressure the BOJ to delay further rate increases. Markets are watching whether the final wording will be enough to calm worries over central bank independence, inflation and fiscal discipline.
For households and companies, the weak yen and renewed volatility in oil prices remain major risks. A sustained rise in crude would raise gasoline, electricity, transportation and food-production costs, adding pressure on consumers and firms already dealing with higher wages and imported-material expenses.
TV Tokyo’s business coverage has continued to focus on these household and corporate cost pressures, including inflation, wages, energy costs and asset-price swings. The combination of higher nominal wages, weak yen-driven import costs and rising borrowing expenses is becoming a central issue as Japan moves further away from its deflation-era policy framework.
The global backdrop remained unsettled. U.S. stocks fell overnight as investors reduced technology exposure and assessed the inflation risk from higher oil prices. Asian markets were mixed, with gains in South Korea helping Japan, while investors awaited earnings from major semiconductor companies and U.S. inflation data.
Oil prices remained sensitive to developments around Iran and the Strait of Hormuz. Crude’s earlier rise supported energy-related shares, but its pullback during Asian trading helped ease concern that another sharp energy shock would damage global growth and worsen Japan’s inflation outlook.
The main points to watch next are whether the Nikkei can hold above 67,500 and retest 68,000, whether Kioxia and Advantest can extend their rebound, and whether South Korean semiconductor shares continue to support Tokyo’s AI trade.
Investors will also focus on ASML and TSMC earnings, the yen’s movement near 162 to the dollar, the direction of crude oil, and whether the 10-year JGB yield remains near 2.7%. Further details on pension-fund allocations and the government’s economic blueprint will be watched closely for their impact on the yen, bonds and expectations for the BOJ’s next policy move.
Source: CNBC
