TOKYO - Tokyo stocks rebounded strongly on August 5, with the Nikkei 225 rising to about 66,300 in late-session trading as investors bought back artificial intelligence and semiconductor-related shares, while lower oil prices and a steadier yen helped ease concern over imported inflation.
The broader TOPIX also advanced, rising back above 4,000 as buying spread beyond high-priced technology shares. The move showed that investors were not only returning to the AI trade but were also rebuilding exposure to cyclicals, exporters and selected domestic-demand companies after several days of currency-driven volatility.
The Nikkei’s rise followed a mixed start to August. The index fell on August 3 after coordinated U.S.-Japan yen-buying intervention pushed the currency sharply higher and hurt exporters, then stabilized on August 4 as investors returned to selected semiconductor and data-center-related shares. On August 5, the recovery gathered pace as global technology sentiment improved and oil prices fell sharply.
Nikkei CNBC’s market framing centered on a return of risk appetite in the AI trade. Investors bought back companies linked to memory chips, chip testing, semiconductor equipment, optical fiber, electronic components and data-center infrastructure after Wall Street rallied and Asian semiconductor shares recovered.
The rebound was helped by a stronger tone in South Korea and Taiwan. South Korea’s Kospi rose sharply, supported by renewed buying in SK Hynix and Samsung Electronics, while Taiwan Semiconductor Manufacturing Co. also gained. Tokyo has become increasingly sensitive to moves in those markets because overseas investors treat Japan, South Korea and Taiwan as connected parts of the same AI and memory-chip supply chain.
Kioxia Holdings remained one of the most closely watched stocks and rose in the session, continuing its role as a barometer of confidence in AI servers, data centers and high-bandwidth memory. The memory-chip maker has been extremely volatile since late July, but renewed buying suggested investors were again willing to take selective exposure to the AI hardware cycle.
Advantest also rose strongly as investors returned to chip-testing equipment shares. The company is highly sensitive to expectations for advanced semiconductor demand, and its gains helped lift the Nikkei because of the stock’s large influence on the price-weighted index.
Tokyo Electron, SCREEN Holdings, Kokusai Electric and other semiconductor equipment names were also watched closely. The sector remains attractive because AI-related chip investment is still expanding, but investors have become more selective after July’s correction and are paying closer attention to order visibility, margins and valuation.
Fujikura and Furukawa Electric remained important data-center infrastructure names. Optical fiber, high-speed communication networks and power-related equipment are becoming increasingly important parts of the AI investment theme as cloud operators build larger and more energy-intensive data centers.
SoftBank Group continued to serve as a proxy for global AI sentiment. The stock’s movement is especially important for the Nikkei because of its large index weighting and because investors view the company as exposed to large-scale artificial intelligence infrastructure through its technology portfolio.
The rebound was not only a semiconductor story. Lower oil prices supported fuel-sensitive and domestic-demand shares, while the yen’s stabilization reduced immediate concern that the currency would continue swinging violently after last week’s intervention.
Toyota Motor remained in focus after raising its full-year operating-profit forecast to 3.4 trillion yen and announcing a buyback of about 1 trillion yen. The automaker revised its assumed exchange rate to 160 yen per dollar from 150 yen, highlighting how much a weak yen had supported Japanese exporters before the intervention.
Toyota’s earnings story shows the difficult balance facing the market. The company benefits from a weaker yen, strong hybrid-vehicle demand and improved logistics planning, but investors are now more cautious because authorities are actively trying to prevent excessive yen depreciation. Any sustained move toward a stronger yen could reduce the currency benefit built into exporter earnings forecasts.
The yen traded around the upper 157 range to the dollar, remaining much stronger than its late-July levels near 164 but weaker than the post-intervention high around 155. The currency’s stabilization helped calm the equity market, although traders remained alert to renewed intervention if the yen again moves sharply lower.
The coordinated U.S.-Japan intervention has changed the tone of currency trading. Speculators are more cautious about rebuilding large yen-short positions because U.S. participation suggests that Tokyo has stronger international backing than during earlier unilateral interventions.
At the same time, the U.S.-Japan interest-rate gap remains wide. Unless markets become more confident that the Bank of Japan will raise rates again or that the Federal Reserve will move toward easing, the yen may remain vulnerable to renewed selling.
Japanese government bond yields stayed central to the policy outlook. Shorter-term yields have reflected expectations that the BOJ could raise rates again later this year, while longer-term yields remain sensitive to fiscal policy, inflation and the government’s large investment plans.
The BOJ kept its policy rate at 1% on July 31, but the decision was more hawkish than the headline suggested. Board member Hajime Takata dissented in favor of a hike to 1.25%, and the central bank warned that underlying inflation could exceed its 2% target.
Reuters reported on August 5 that U.S. Treasury Secretary Scott Bessent’s public comments and the joint intervention have strengthened the case for a BOJ rate hike at the September 17-18 meeting. The remarks increased market attention on whether Japan’s monetary policy could move sooner than previously expected.
The issue is sensitive because the BOJ must preserve its independence. U.S. pressure may reinforce market expectations for another rate increase, but Japanese policymakers will need to show that any move is based on domestic inflation, wages and price-setting behavior rather than foreign political pressure.
Japan’s economic data gave the BOJ more evidence that the wage-price cycle is improving. Real wages rose 1.6% in June from a year earlier, marking a sixth straight monthly gain. Stronger real wages support household purchasing power and strengthen the argument that Japan can withstand gradual monetary tightening.
However, the services sector showed signs of strain. The S&P Global services purchasing managers’ index fell to 51.2 in July from 52.2 in June, indicating slower growth. New business rose at the weakest pace in two years, while foreign demand declined for a fourth straight month.
Cost pressure remained strong in the services survey. Companies reported higher input costs from wages, Middle East tensions and the weak yen, forcing them to raise selling prices at the fastest pace since April 2014. That suggests inflation pressure is still moving through the economy even as oil prices fall.
For households, the data are mixed. Real wage gains are encouraging, but consumers are still dealing with higher prices for food, utilities, transport and daily services. TV Tokyo’s broader business coverage has continued to focus on the gap between rising pay and the cost of living, especially for households facing repeated price increases.
The government is considering relief measures, including possible food-related consumption-tax support. Such steps could help households but would also raise questions about fiscal discipline and replacement revenue at a time when investors are watching Japan’s bond market closely.
Prime Minister Sanae Takaichi’s administration is also pursuing more than 370 trillion yen in public and private investment through fiscal 2040. The strategy targets semiconductors, artificial intelligence, energy security, defense, shipbuilding, robotics, space and other strategic industries.
The growth agenda supports many of the sectors that led the August 5 rebound, including AI infrastructure, semiconductors, cables, power systems and advanced manufacturing. However, investors remain focused on how the government will fund the program without increasing pressure on long-term JGB yields.
Oil was the most important positive global factor. Brent crude fell to around $78.85 a barrel, while U.S. crude dropped to about $75.09, as markets responded to signs of progress in U.S.-Iran peace talks and improving oil traffic through the Strait of Hormuz.
The decline in oil prices offered direct relief to Japan because the country imports most of its energy. Lower crude reduces pressure on gasoline, electricity, logistics, utilities, airlines, chemical producers and manufacturers.
A stronger yen combined with lower oil is especially helpful for households and import-dependent companies. In July, the market was worried that a weak yen and crude oil above $90 would cause another wave of imported inflation. By August 5, both pressures had eased, giving investors a reason to rotate back into risk assets.
The global backdrop was more supportive. U.S. stocks had reached new highs, helped by strong corporate earnings, technology gains and reduced concern over inflation. Asian markets followed, with Japan, South Korea and Taiwan leading the regional rebound.
Still, investors remained cautious about whether AI spending can continue expanding without raising concerns about profitability. Some U.S. technology companies have faced pressure when investors judged that capital expenditure was rising faster than returns.
That distinction matters for Japan. Chipmakers, testing-equipment makers, component suppliers and data-center infrastructure companies may benefit directly from AI investment, but valuations can still fall if investors believe expectations have moved too far ahead of earnings.
What to watch next: whether the Nikkei can hold above 66,000, whether TOPIX remains above 4,000, and whether Kioxia, Advantest, Tokyo Electron, Fujikura and other AI-related names can extend the rebound without triggering renewed profit-taking.
Investors will also monitor the yen around 157 to 158 to the dollar. A move back toward 160 would test the credibility of the coordinated intervention and could increase expectations for another BOJ rate hike, while a move closer to 155 would ease inflation pressure but weigh on exporters.
Other key indicators will be the two-year and 10-year JGB yields, Brent crude below $80, U.S.-Iran talks, South Korean semiconductor shares and upcoming Japanese earnings. The key question for Tokyo is whether lower oil, a steadier yen and stronger AI sentiment can turn this week’s rebound into a more durable recovery.
Source: CNBC
