TOKYO - Tokyo stocks edged higher on August 4, with the Nikkei 225 closing at 63,957.53, up 202.63 points, or 0.32%, as buybacks in artificial intelligence and semiconductor-related shares helped offset caution over further yen-buying intervention and a weaker tone in some exporters.
The broader TOPIX finished almost flat, rising 1.75 points, or 0.04%, to 3,961.78. The narrow gain showed that the market remained divided between renewed buying in selected technology shares and caution toward companies exposed to the sharp rebound in the yen after last week’s coordinated U.S.-Japan currency intervention.
The Nikkei’s advance followed a volatile start to August. The index fell on August 3 as the yen strengthened sharply, hurting exporters, after Japan and the United States confirmed rare coordinated intervention to support the Japanese currency. On August 4, the market stabilized as investors judged that the currency shock had not derailed the broader recovery in AI-linked shares.
Nikkei CNBC’s market framing centered on two forces moving in opposite directions: renewed appetite for AI and semiconductor names, and continued caution over the yen. Investors were willing to buy back selected chip, optical-fiber, electronic-component and data-center-related companies, but they remained reluctant to chase the broader market while exchange-rate policy remained uncertain.
The yen was still the day’s dominant macro factor. The dollar traded around 157.67 yen at 3 p.m., after the Japanese currency had strengthened as far as 155.20 the previous session. The yen remained far stronger than July’s low near 163.99, but its slight retreat on August 4 showed that intervention had not eliminated pressure from the U.S.-Japan interest-rate gap.
Reuters reported that the yen had surged as much as 5% over three trading sessions after Tokyo and Washington confirmed coordinated yen-buying intervention. Market participants said the U.S. backing gave the operation far more weight than Japan acting alone, making speculators more cautious about rebuilding large yen-short positions.
Former BOJ official Atsushi Takeuchi told Reuters that Japan and the United States would “certainly” intervene again if the yen resumed a clear downtrend. He said U.S. involvement created the perception that authorities would not allow one-way yen weakness to continue, but also warned that intervention alone could not permanently strengthen the currency unless fiscal and monetary-policy concerns were addressed.
The stronger yen has created a difficult tradeoff for Japanese equities. It helps households and import-dependent companies by reducing the yen cost of energy, food and raw materials, but it weighs on exporters by lowering the value of overseas earnings when converted back into yen.
That tradeoff was visible in market positioning. Export-sensitive automakers and electronics companies remained under scrutiny, while some domestic-demand and technology shares recovered. Investors were no longer treating yen weakness as an automatic positive for the stock market, because the inflationary cost of a weak currency had become increasingly serious for households.
Toyota Motor remained a central corporate focus. The automaker raised its full-year operating-profit forecast to 3.4 trillion yen after revising its assumed exchange rate to 160 yen per dollar from 150 yen. It also announced a buyback of about 1 trillion yen, reinforcing its shareholder-return stance.
The improved forecast reflected the benefit of the weak yen, strong hybrid-vehicle sales and steps to manage Middle East logistics risks. Toyota has shifted to overland routes for shipments to the Middle East that bypass the Strait of Hormuz, helping reduce exposure to potential disruptions in one of the world’s most sensitive energy and shipping corridors.
Even so, Toyota’s shares were under pressure as investors focused on the risk that a stronger yen could weaken future earnings momentum. The company’s results highlighted how dependent exporters remain on currency assumptions at a time when authorities are actively trying to prevent excessive yen depreciation.
AI-related shares were mixed but generally more supportive than on August 3. Kioxia Holdings rose, continuing its role as one of Tokyo’s main gauges of investor confidence in AI servers, data centers and high-bandwidth memory. The stock has been extremely volatile since late July, but renewed buying suggested that some investors still see the recent correction as an opportunity.
Fujikura gained as investors returned to optical-fiber and data-center infrastructure names. Demand for high-speed communication networks, power systems and advanced connectivity remains a major part of the AI investment theme, giving the stock a different profile from memory and chip-equipment shares.
SoftBank Group weakened, limiting the Nikkei’s advance because of its large index weighting. The company remains a proxy for global AI investment sentiment through its technology portfolio and exposure to large-scale artificial intelligence infrastructure, but it is also highly sensitive to overseas risk appetite and shifts in the yen.
Furukawa Electric was among the strongest performers, supported by demand for cable, optical-fiber and infrastructure-related businesses. Otsuka Holdings also advanced, reflecting investor interest in defensive pharmaceutical and health-care names during a period of market volatility.
On the negative side, NH Foods and Yamato Holdings fell after earnings disappointed investors. Their declines showed that companies facing cost pressure, logistics expenses or weaker-than-expected operating trends remain vulnerable, even as the broader market tries to stabilize.
Yamato’s weakness was particularly important for the household-economy story. Logistics companies remain exposed to labor shortages, fuel prices, delivery costs and the difficulty of passing higher expenses on to customers. Their earnings are a useful indicator of pressure across Japan’s distribution system.
NH Foods’ decline also reflected concern over food costs and consumer pricing. Food companies must balance higher input expenses against household resistance to further price increases, especially when wage growth has not fully offset the rise in living costs.
Japanese government bonds remained central to the policy outlook. The Bank of Japan kept its policy rate at 1% on July 31, but its message was more hawkish than the headline decision suggested. Board member Hajime Takata dissented in favor of a hike to 1.25%, and the BOJ warned that underlying inflation could exceed its 2% target.
The BOJ’s policy path is now closely tied to the yen. If the currency stabilizes in the mid-150s, the central bank may have more time to judge whether wage growth and corporate price-setting behavior are strong enough to justify another rate increase. If the yen weakens again toward 160, pressure for faster tightening could return.
Shorter-term bond yields have already reflected expectations of further rate increases. The two-year JGB yield briefly reached its highest level since 1995 after the BOJ meeting and intervention moves, showing that markets are pricing in a higher probability of further normalization.
Longer-term yields remain sensitive to fiscal policy. Prime Minister Sanae Takaichi’s administration is pursuing a strategy built around more than 370 trillion yen in public and private investment through fiscal 2040, targeting semiconductors, artificial intelligence, energy security, defense, shipbuilding, robotics and space.
The plan is intended to raise Japan’s growth potential and strengthen supply chains, but investors remain concerned about how the spending will be funded. If markets conclude that fiscal expansion will increase bond issuance without a credible path to sustainability, upward pressure on yields could return.
The government is also considering relief measures for households, including possible food-related consumption-tax relief. Such steps could help consumers deal with higher prices, but they would also raise questions about replacement revenue and fiscal discipline.
TV Tokyo’s broader business themes remained highly relevant on August 4: wages, household inflation, energy costs, logistics, food prices and the weak-yen burden on daily life. The yen’s rebound offers some relief, but consumers are unlikely to feel an immediate improvement unless import costs fall and companies slow price increases.
For households, the combined movement in the yen and oil is crucial. A stronger yen reduces the cost of imported energy and food, while lower oil prices ease pressure on gasoline, electricity and transport. However, if the yen weakens again or oil rebounds, the pressure on household budgets could quickly return.
Oil prices were steadier after the sharp fall on August 3. Brent crude traded in the mid-$80 range after dropping more than 4% on hopes that U.S.-Iran talks could reduce the risk of disruption around the Strait of Hormuz. The decline gave Japan some relief from the inflation shock that dominated July.
The Middle East situation remains a major external risk. Japan depends heavily on imported energy, and any renewed disruption to Gulf shipping routes would feed quickly into import costs, the trade balance, corporate margins and household purchasing power.
The global backdrop was more supportive than at the start of the week. Wall Street rallied after lower oil prices eased inflation fears, with U.S. technology shares recovering and the S&P 500 moving close to its recent record. That helped stabilize sentiment toward Asian shares, although markets remained cautious about semiconductor volatility.
South Korea’s Kospi rose after recent sharp swings, giving some support to Japan’s semiconductor and AI-related names. Tokyo and Seoul remain closely linked because overseas investors increasingly treat Japanese equipment makers, South Korean memory producers and U.S. AI shares as parts of the same technology trade.
The AI theme remains intact but more selective. Investors are no longer buying every company connected to artificial intelligence. They are looking more closely at earnings, order visibility, capital-spending plans, margin trends and whether companies directly benefit from data-center investment.
For Japanese companies, that distinction matters. Chip-equipment makers, memory producers, component suppliers, cable makers and industrial-electronics groups may benefit at different points in the AI investment cycle, but their valuations are now being tested against actual earnings and guidance.
What to watch next: whether the Nikkei can break above 64,000 and hold that level, whether TOPIX can regain a clearer upward trend, and whether buying in Kioxia, Fujikura, Furukawa Electric and other AI-infrastructure shares broadens into semiconductor equipment and electronics.
Investors will also monitor Toyota’s share reaction after its raised forecast and buyback, especially because its new currency assumption highlights how important exchange rates remain for Japanese exporters.
The yen is still the main macro risk. A move back toward 160 to the dollar would test the credibility of the coordinated intervention and could revive expectations of another BOJ rate hike. A sustained move closer to 155 would reduce inflation pressure but could weigh on exporters.
Other key indicators will be the two-year and 10-year JGB yields, Brent crude in the mid-$80 range, U.S. nonfarm payrolls later this week, and South Korean semiconductor shares. August 4 showed that Tokyo can stabilize after the intervention shock, but the market’s next direction depends on whether the yen, oil prices and AI earnings continue to move in its favor.
Source: CNBC
