TOKYO - Tokyo stocks rose on August 26, with the Nikkei 225 closing at 66,262.16, up 405.73 points, or 0.62%, as investors bought back selected semiconductor and financial shares, although trading was thin ahead of Nvidia’s earnings and uncertainty remained over artificial intelligence valuations, the yen and Bank of Japan policy.
The broader TOPIX rose 17.35 points, or 0.42%, to 4,111.02, extending its recent resilience. Prime Market breadth was positive, with 976 stocks rising, 515 falling and 59 unchanged, but the number of gainers still accounted for only about 63% of the market, showing that buying remained selective rather than aggressive.
The Nikkei began weaker as investors reduced positions ahead of Nvidia’s May-July earnings, scheduled for release early on August 27 Japan time. The index briefly fell into the lower 65,000 range before reversing course as South Korea’s Kospi strengthened and some semiconductor-related shares attracted buybacks.
Market turnover was notably low. Kabutan reported that Prime Market trading value fell below 7 trillion yen for the first time since April 21, indicating that many investors chose to stay on the sidelines rather than take large positions before Nvidia’s results and upcoming U.S. economic data.
Nikkei CNBC-style market commentary centered on a cautious rebound rather than a full restoration of risk appetite. The market was supported by buybacks in some AI-related names and by firm financial shares, but investors remained unwilling to make a major directional bet before the next test of the global AI investment cycle.
Nvidia’s earnings have become the single most important overseas event for Tokyo’s semiconductor and artificial intelligence trade. Investors are looking for confirmation that demand for AI processors, data-center servers and related infrastructure remains strong enough to justify high valuations across chipmakers, memory producers, testing-equipment firms, electronic-component makers and optical-fiber suppliers.
The market reaction to Nvidia will matter directly for Japanese shares including Advantest, Tokyo Electron, Kioxia Holdings, SoftBank Group, Fujikura, Furukawa Electric, Ibiden, SCREEN Holdings, Lasertec, Murata Manufacturing and Taiyo Yuden. These companies have become linked through the broader AI supply chain, from advanced chips and memory to testing, packaging, components, power systems and high-speed communications.
Advantest was a major focus after recent swings in chip-testing shares. The company’s large weighting in the Nikkei means even modest moves can have an outsized effect on the index. Investors continue to view it as one of Japan’s most direct beneficiaries of AI semiconductor demand, but also one of the most vulnerable if Nvidia’s guidance disappoints.
Kioxia remained another key barometer. The memory-chip maker has experienced extreme volatility since July and continues to reflect investor confidence in AI servers, high-bandwidth memory and data-center demand. Its share price remains sensitive to global memory sentiment, South Korean chip stocks and speculative positioning in Tokyo.
SoftBank Group also remained central to the Nikkei’s direction. The company’s exposure to OpenAI, robotics, digital infrastructure and other large AI themes makes it one of Tokyo’s most visible proxies for global artificial intelligence investment. Its large index weighting means it can strongly influence the Nikkei even when the broader market is mixed.
The rebound in South Korean shares helped sentiment during Tokyo trading. Investors have increasingly treated Japanese chip-equipment makers, South Korean memory producers and U.S. AI shares as a connected global technology trade. When Seoul strengthens, Tokyo’s semiconductor complex often receives support; when Korean memory shares weaken, selling pressure spreads quickly to Japan.
Financial shares also contributed to the market’s firmer tone. Kabutan said banks and other financial stocks showed resilient movement as expectations for further Bank of Japan tightening remained high. Securities and commodity futures, services, insurance and banks were among the strongest industry groups.
The strength in financials reflects the continuing shift away from Japan’s long period of ultra-low rates. Higher rates can support bank lending margins and investment income, although the sector remains sensitive to sudden changes in bond yields and the valuation of banks’ securities holdings.
The yen remained around the 159-yen range against the dollar, stronger than its late-July lows near 164 but still weak enough to keep imported inflation and currency-policy risks in focus. Traders remain alert to any move beyond 160, which could revive speculation over intervention or increase expectations of a Bank of Japan rate increase.
A weak yen remains a complicated factor for Japanese equities. It supports exporters by raising the yen value of overseas earnings, but it also increases the cost of imported fuel, food, raw materials, chemicals and consumer goods. That pressure is especially important for households, which continue to face higher prices for groceries, gasoline, electricity and daily services.
Japanese government bond yields remained near elevated levels after recent pressure pushed the 10-year yield close to 3%. Markets continue to watch whether stronger inflation data, yen weakness and fiscal spending concerns will force the BOJ to move more quickly.
The BOJ kept its policy rate at 1% at its July 30-31 meeting, 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.
The September 17-18 meeting has therefore become the next key domestic policy event. Investors are watching whether the BOJ will raise rates again if the yen weakens, wholesale prices stay elevated and companies continue passing higher costs to consumers.
Japan’s recent inflation data support a more cautious BOJ stance. July core consumer prices rose 1.8% from a year earlier, while an index excluding both fresh food and energy rose 1.9%. Producer prices rose 7.2%, showing continued cost pressure at the corporate level.
The question for policymakers is whether those costs are becoming embedded in household prices and wages. If companies continue to lift selling prices while wage growth remains firm, the BOJ may conclude that Japan is moving closer to a self-sustaining inflation cycle.
For households, however, the same process remains painful. Wage gains have improved, but consumers continue to feel the burden of food, utility, transport and service prices. TV Tokyo’s broader business themes remain closely tied to this issue: whether pay increases can keep up with daily living costs, and whether government relief can cushion households without undermining fiscal discipline.
Prime Minister Sanae Takaichi’s administration is considering food-related support and other cost-of-living measures while also pursuing a long-term investment strategy built around more than 370 trillion yen in public and private spending through fiscal 2040.
The investment plan targets semiconductors, artificial intelligence, energy security, defense, shipbuilding, robotics, space and other strategic sectors. It supports many of the industries leading Japan’s equity market, but rising bond yields have increased scrutiny of how the government will finance the agenda.
The Finance Ministry is considering using an assumed interest rate of 3.8% for next fiscal year’s budget request, according to Reuters. That would be the highest in 29 years and reflects the strain that higher long-term rates are placing on public finances.
The global backdrop was mixed but somewhat supportive. Wall Street rose overnight, with both the Dow and Nasdaq higher, and the Philadelphia Semiconductor Index rebounded as investors positioned cautiously ahead of Nvidia’s earnings. That helped stabilize Tokyo after earlier selling in chip-related shares.
Oil prices moved lower, easing one of Japan’s main inflation risks. Reuters reported that Brent crude fell nearly 3% to $85.95 a barrel after Iran and Oman discussed establishing a joint navigational corridor to clear mines and resume traffic through the Strait of Hormuz.
For Japan, lower oil is important because the country imports most of its energy. A decline in crude prices helps reduce pressure on gasoline, electricity, aviation fuel, logistics, chemicals and manufacturing. The benefit is especially valuable when the yen remains weak, because imported energy is priced largely in dollars.
Still, Middle East risk has not disappeared. Any renewed disruption to the Strait of Hormuz or Red Sea shipping routes could quickly push oil prices higher again and revive concern over imported inflation.
Global bond markets also steadied as U.S. Treasury yields fell after weaker-than-expected U.S. indicators and stronger demand for government bonds. Lower yields helped support equities by reducing pressure on valuations, particularly in technology and growth shares.
Investors are now waiting for U.S. personal consumption expenditure data, durable-goods orders and revised gross domestic product figures, which could influence Federal Reserve expectations and the dollar-yen exchange rate. A stronger U.S. inflation reading would support the dollar and pressure the yen, while softer data could ease imported-inflation concerns in Japan.
What to watch next: Nvidia’s earnings and guidance will set the immediate tone for Japan’s AI trade. Strong data-center revenue and firm margins could lift Advantest, Tokyo Electron, Kioxia, SoftBank Group, Fujikura, Furukawa Electric, Ibiden and other AI-related names, while any disappointment could revive selling.
Investors will also monitor whether the Nikkei can hold above 66,000 after reclaiming the level on August 26, and whether TOPIX can continue its steadier advance.
The yen around 159 to the dollar remains a key macro signal. A move beyond 160 would revive intervention speculation and strengthen expectations for a September BOJ rate increase, while a stronger yen would ease household inflation pressure but weigh on exporters.
The 10-year JGB yield’s distance from 3% will remain another critical domestic factor. A renewed rise could pressure growth stocks, fiscal policy and bank valuations, while a retreat would support risk appetite.
Oil near the mid-$80 range, U.S. economic data, South Korean semiconductor shares and BOJ communication will shape the next stage of trading. August 26 showed that Tokyo can still rebound before a major AI test, but the low turnover made clear that investors are waiting for Nvidia before committing fresh capital.
