TOKYO - Tokyo stocks ended slightly lower on August 7, with the Nikkei 225 closing at 65,606.71, down 76.55 points, or 0.12%, as selling in chip-related and artificial intelligence-linked shares outweighed solid buying in the broader market and a late recovery led by Fujikura.
The broader TOPIX rose about 0.47%, showing again that the day’s weakness was concentrated in a narrow group of high-priced technology shares rather than the full market. The divergence continued a pattern seen throughout late July and early August, with the Nikkei pulled around by AI and semiconductor heavyweights while the wider market found support from domestic-demand, financial, consumer and selected industrial shares.
The Nikkei was weaker for much of the day after U.S. technology shares softened overnight and oil prices rose again on Middle East concerns. Early trading was led lower by semiconductor and chip-equipment names, but the index narrowed its decline toward the close after Fujikura’s earnings revision revived buying in data-center infrastructure shares.
Nikkei CNBC’s market framing centered on the durability of the AI trade after a week of sharp reversals. Investors are no longer buying the entire theme indiscriminately. Instead, they are separating companies with confirmed earnings momentum and direct exposure to data-center investment from those whose valuations may already assume an extended boom.
The index’s small decline masked a stronger undertone in the broader market. While semiconductor shares and some AI-related names were sold, more than half of Prime Market stocks gained, suggesting that investors were still willing to put money into Japanese equities when earnings visibility, pricing power or domestic demand appeared strong.
The market also remained sensitive to developments in South Korea. Reuters reported that South Korea’s Kospi fell for another session and recorded its seventh straight weekly decline, despite earlier strength in AI-related chip stocks. That kept pressure on Tokyo because overseas investors increasingly treat Japan’s semiconductor equipment makers, South Korean memory producers and U.S. AI shares as parts of the same global technology trade.
SoftBank Group remained one of the most important drags on the Nikkei. The stock fell despite the company reporting quarterly profit above analyst expectations earlier in the week. Investors remained focused on the cost and financing of SoftBank’s aggressive artificial intelligence strategy, including its exposure to OpenAI, robotics and digital infrastructure.
SoftBank’s role in the Nikkei has become unusually large because of its index weighting and its position as a proxy for global AI investment sentiment. Even when the company reports solid earnings, the stock can fall if investors worry that AI-related capital commitments, debt financing or future valuation swings will place pressure on returns.
Chip-related shares also weighed on the market. Lasertec, SCREEN Holdings, Tokyo Electron, Advantest and related semiconductor equipment names were under pressure as investors questioned whether the recent rebound in AI hardware stocks had run too far. The sector remains supported by long-term demand for advanced chips, but near-term trading is being driven by valuation, earnings guidance and overseas investor positioning.
Kioxia Holdings remained closely watched after weeks of extreme volatility. The memory-chip maker has become one of Tokyo’s clearest gauges of confidence in AI servers, data centers and high-bandwidth memory. Its movements continue to affect sentiment across other memory, testing and equipment names.
Fujikura was the standout positive story. The company’s upward earnings revision helped reduce the Nikkei’s loss and reinforced investor interest in optical fiber, cables and power-related components used in data centers. The move supported the view that the AI trade is shifting from the first wave of chip and software names toward infrastructure suppliers that help build and connect large-scale computing facilities.
Furukawa Electric and other data-center infrastructure names were also watched as investors assessed whether the second and third waves of the AI trade can remain stronger than the more volatile semiconductor group. Demand for power systems, high-speed communications and network equipment remains a major structural theme, but valuations have become more demanding.
Consumer and defensive shares helped support the broader market. The TOPIX’s gain reflected buying in sectors less exposed to the swings in AI hardware, including food, pharmaceuticals, services and selected domestic-demand companies. Investors continued to favor businesses with stable demand and the ability to raise prices without losing customers.
Kikkoman, Kao, Bandai Namco and other consumer or content-related names remained part of that rotation after supporting the market earlier in the week. The move suggested that investors are looking for companies that can defend margins in an economy where wages are rising but households remain sensitive to price increases.
The yen weakened during the session, with the dollar trading around 158.38 yen in global markets. The currency remained much stronger than its late-July lows near 164, but the move back toward 158 showed that coordinated U.S.-Japan intervention has not removed pressure from the wide interest-rate gap between the two countries.
The yen’s direction remains one of the most important forces for Japanese equities. A weaker yen supports exporters by raising the value of overseas earnings, but it also increases the cost of imported fuel, food, raw materials and industrial inputs. A stronger yen eases inflation pressure but can weigh on automakers, electronics makers and other exporters.
The market is now treating the currency as a policy signal as much as an earnings factor. If the yen weakens again toward 160 to the dollar, investors may expect stronger verbal warnings from the Ministry of Finance and more pressure on the Bank of Japan to raise interest rates sooner. If the yen stabilizes closer to 155, the BOJ may have more time to assess wages, services prices and broader inflation momentum.
Reuters reported that Japan may have spent as much as $58.97 billion on July 30 and $36.58 billion the following day in yen-buying intervention, potentially making the latest operation one of the largest on record. The scale of the suspected action underscored how seriously authorities view disorderly yen weakness.
The intervention has changed market behavior, but it has not solved the underlying problem. As long as U.S. yields remain high and Japan’s policy rate stays at 1%, the incentive to sell yen for higher-yielding dollars remains significant. That is why investors remain focused on whether the BOJ will raise rates again in September, October or December.
Japanese government bond yields stayed central to the outlook. Shorter-term yields have reflected expectations for further BOJ normalization after the July 31 meeting, when the central bank kept rates unchanged but delivered a hawkish message. 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 challenge is becoming more complicated because some recent data point to resilience, while others show strain. Real wages rose in June, supporting the view that a wage-price cycle is forming, but household spending weakened unexpectedly, showing that consumers remain cautious in the face of high living costs.
Reuters reported that Japan’s household spending fell unexpectedly in June, affected by weather and uncertainty linked to the Middle East conflict. The decline showed that higher real wages alone may not be enough to produce a strong consumption recovery if households continue to worry about energy prices, food costs and financial-market volatility.
A separate Reuters poll showed that Japan’s economy is expected to have expanded for a third straight quarter in April-June, supported by domestic demand and a decline in imports. That would give the BOJ some confidence that the economy can withstand gradual tightening, but the quality of growth remains important because household spending is still vulnerable.
Economy Minister Minoru Kiuchi has taken a calmer view of inflation, saying recent consumer price increases remain moderate and pointing to government efforts to cushion households through fuel subsidies. However, BOJ officials are watching whether companies continue passing higher costs into services and durable goods prices.
Prime Minister Sanae Takaichi’s government is also pushing ahead with measures to ease the cost of living. Reuters reported this week that the administration approved a costly plan to remove the 8% consumption tax on food for two years, creating a revenue shortfall of roughly 5 trillion yen.
The food-tax cut is intended to ease pressure on households, but it also increases concern over fiscal discipline. Investors are already watching Japan’s long-term bond yields because the government is pursuing large spending commitments, including defense, household relief and a 370 trillion yen public-private investment strategy through fiscal 2040.
That strategy targets semiconductors, artificial intelligence, energy security, defense, shipbuilding, robotics, space and other strategic sectors. It supports many of the same industries that have driven Japan’s stock-market rally, but markets remain focused on whether the funding plan is credible.
For households, the policy question is practical rather than abstract. Food-tax relief would lower the direct burden of grocery prices, but consumers also face higher electricity, transport, insurance and service costs. TV Tokyo’s broader business coverage has continued to focus on that gap between rising nominal wages and the difficulty many households still feel in daily spending.
Businesses face the same pressure from the other side. Companies with strong brands, scale or technology can raise prices and maintain margins, while smaller operators face higher wages, energy bills, logistics costs and import prices without the same pricing power.
Oil prices rose again on August 7, with Brent crude at about $83.78 and U.S. crude around $78.22. The increase reflected renewed Middle East risk, including Houthi attacks on Saudi Arabia and continuing uncertainty over shipping through the Strait of Hormuz.
For Japan, oil in the low-$80 range is less damaging than the levels above $90 seen in July, but it still matters because the country imports most of its energy. A weaker yen magnifies the domestic impact of crude oil, raising costs for gasoline, electricity, airlines, logistics companies, utilities, chemical producers and manufacturers.
The global backdrop was cautious ahead of U.S. payroll data. Reuters reported that Asian shares paused as investors waited for the employment report, which could influence expectations for the Federal Reserve’s September decision. A stronger jobs number would support U.S. yields and the dollar, while weaker data could ease pressure on the yen.
Wall Street had softened overnight, with investors balancing solid corporate earnings against concern over oil prices, interest rates and AI valuations. Strong earnings from many U.S. companies have helped support risk appetite, but technology stocks remain vulnerable whenever investors question the return on large AI investment.
China provided a partial offset in Asia. The CSI 300 rose after strong export data, while Hong Kong also gained. South Korea remained weaker, adding pressure to the regional technology complex.
What to watch next: whether the Nikkei can hold above 65,000 after narrowing its August 7 decline, whether TOPIX strength continues, and whether Fujikura’s earnings revision can support a wider rebound in data-center infrastructure shares.
Investors will also watch SoftBank Group after its earnings, particularly whether concerns over AI funding and debt continue to outweigh better-than-expected profit. Kioxia, Tokyo Electron, Advantest, Lasertec and SCREEN Holdings will remain key indicators of whether semiconductor selling is stabilizing.
The yen around 158 to the dollar remains the central macro risk. A move back toward 160 would test the credibility of the latest intervention and could increase expectations for a BOJ rate increase, while a stronger yen would ease household inflation but pressure exporters.
Other key indicators will be the two-year and 10-year JGB yields, Brent crude above $80, U.S. payroll data, South Korean chip shares and Japan’s upcoming GDP figures. August 7 showed that the broader Japanese market remains firm, but the Nikkei will struggle to gain traction unless its AI heavyweights stop dragging the index lower.
Source: CNBC
