TOKYO - Tokyo stocks fell on September 28, with the Nikkei 225 closing at 65,878, down 486.58 points, as an early rally above 67,000 faded into profit-taking despite dividend-related buying and continued support for banks and insurers.
The broader TOPIX fell 16.59 points to 4,112.00, showing that the weakness was not limited to the price-weighted Nikkei. The Growth Market 250 Index also declined, dropping 9.08 points to 791.47 as smaller growth shares remained vulnerable to higher yields and profit-taking.
The Nikkei opened higher at 66,506 after a strong U.S. market lead, lower crude oil prices and softer U.S. long-term yields helped sentiment. Early buying in semiconductor and artificial intelligence-related shares pushed the index as high as 67,035, briefly reclaiming the 67,000 level.
The early strength did not last. Buying eased after the index moved more than 600 points above the previous close, and profit-taking spread through the semiconductor complex. The Nikkei turned lower before lunch, weakened again in the afternoon and finished at its intraday low.
The reversal ended a five-session winning streak and showed that investors were reluctant to chase prices after last week’s sharp rally. The market had entered the day with strong momentum after reclaiming 66,000 on September 25, but the failure to hold early gains suggested that the rally had become stretched.
The session was also shaped by the September-end dividend calendar. September 28 was the final rights-carrying trading day for many companies with September 30 record dates, making it the last day to buy shares and qualify for interim dividends or shareholder benefits.
Dividend demand supported some banks, insurers and defensive income names, but it was not strong enough to offset selling in high-priced technology shares and other recent winners. The dividend-related support also came with caution because September 29 will be the ex-dividend date, when many shares mechanically adjust lower.
Nikkei CNBC-style market commentary would likely focus on the contrast between the morning surge and the weak close. The market had a favorable overseas lead and clear dividend-related demand, but could not sustain a move above 67,000.
The reversal showed that investors were willing to take profits after the rapid rise from mid-September lows. It also suggested that the 67,000 area remains a psychological resistance level for the Nikkei.
The 75-day moving average in the 66,000 range was another technical focus. The Nikkei briefly moved above that level in the morning, but its failure to hold the gain into the close weakened the short-term technical picture.
Semiconductor and AI-related shares again dominated index movement. SoftBank Group, Advantest and Tokyo Electron supported the Nikkei at several points during the day, but the broader chip complex lost momentum.
At 2 p.m., SoftBank Group was still the largest positive contributor to the Nikkei, followed by Advantest and Tokyo Electron. Their gains helped limit the index’s decline, but they could not offset weakness in Ibiden, Fast Retailing, Kioxia Holdings, Chugai Pharmaceutical and KDDI.
Ibiden was the largest negative contributor. The advanced substrate maker had been one of the major beneficiaries of AI-related semiconductor demand, but investors took profits after recent gains.
Kioxia Holdings also fell, weighing on the Nikkei and signaling renewed caution toward memory-related shares. The company remains closely tied to high-bandwidth memory, AI servers and data-center storage demand, but its stock has been highly volatile since July.
Lasertec, SUMCO and other semiconductor-related names also weakened. Their declines showed that investors were becoming more selective after the recent AI-led rally.
Tokyo Electron and Advantest remained key supports. Tokyo Electron is central to Japan’s role in semiconductor manufacturing equipment, while Advantest is one of the clearest beneficiaries of demand for advanced AI chip testing. Both remain highly sensitive to global AI sentiment, U.S. technology shares and bond yields.
SoftBank Group also stayed in focus as Tokyo’s most visible proxy for global AI investment through its exposure to OpenAI, Arm, robotics and digital infrastructure. Its gain helped the Nikkei, but the stock’s strength was not enough to keep the broader index positive.
The AI trade remains powerful but unstable. Investors continue to believe in long-term demand for chips, memory, optical fiber, power systems, data-center infrastructure and software, but they are now paying closer attention to valuation, funding needs, regulation, power supply and the pace of AI development.
The September 28 session showed that AI buying alone may no longer be enough to sustain the Nikkei if market breadth weakens. A few high-weight technology names can lift the index in the morning, but the market remains vulnerable when profit-taking spreads.
Financial shares were the clearest area of strength. Insurance was the strongest industry group, followed by banks and electric and gas. The buying reflected both dividend demand and expectations that higher interest rates will support financial-sector earnings.
Banks had already rallied on September 25 as investors bought ahead of the dividend deadline and positioned for a gradual rise in Japanese interest rates. Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, Mizuho Financial Group, Resona Holdings and regional banks remain key gauges of that theme.
The Bank of Japan raised its policy rate to 1.25% on September 18, the highest level in 31 years. The decision was interpreted as less hawkish than feared because of the split vote and cautious guidance, but investors still expect Japan’s rate environment to remain much higher than in the ultra-low-rate era.
Higher rates can improve bank lending margins and investment income. They can also support insurers by lifting returns on bond portfolios and other financial assets. That is why financial shares continued to attract buying even as the broader market weakened.
However, the sector is not without risk. If Japanese government bond yields rise too quickly, financial institutions may face valuation losses on bond holdings. If the BOJ tightens more slowly than expected, the earnings upside from higher rates may be delayed.
The yen remained another major focus. The dollar-yen rate traded around the 157 range in late Tokyo trading, leaving the currency weak even after the BOJ’s September rate hike.
A weak yen supports exporters by increasing the yen value of overseas earnings, but it also raises import costs for energy, food, raw materials and consumer goods. That keeps pressure on households and import-dependent companies.
The yen’s failure to strengthen decisively after the BOJ’s rate hike has kept intervention risk in the background. Japanese authorities have repeatedly said they are watching excessive currency moves, and traders remain alert for any signs of renewed action if the yen moves quickly toward 160.
For exporters, the yen near 157 remains supportive. Automakers, machinery makers, electronics companies and precision-equipment manufacturers can benefit from currency translation. Toyota, HOYA, Daikin, SMC and Bridgestone were among stocks reported higher during the morning session.
For importers and retailers, the currency remains a problem. A weaker yen raises costs for goods, materials and food, making pricing power more important.
Oil prices gave the market some relief. U.S. stocks rose on September 25 after hopes for progress toward reopening the Strait of Hormuz helped push crude prices lower, while lower U.S. long-term yields also supported equities.
For Japan, lower crude is important because the country imports most of its energy. Cheaper oil eases pressure on gasoline, electricity, aviation fuel, shipping, logistics, chemicals and manufacturing.
Even so, energy remains a major risk. Oil prices are still high by historical standards, and any renewed disruption in the Middle East could quickly revive inflation pressure.
The weaker yen means Japan remains vulnerable even when crude eases. If oil rebounds while the yen stays near 157 or weakens toward 160, import costs could rise again and squeeze households and companies.
Households remain under pressure despite improving wages. Consumers continue to face high costs for groceries, gasoline, electricity, transport and services. The market is watching whether wage increases are strong enough to sustain consumption after several years of price increases.
Companies are still deciding how much of higher labor, fuel, logistics, materials and borrowing costs can be passed on to customers. Firms with pricing power, strong brands, stable demand or exposure to long-term investment remain better positioned.
Companies without pricing power face a more difficult environment. If rates rise, the yen weakens and consumers resist price increases, profit margins could come under pressure even when sales appear steady in nominal terms.
The September 28 sector moves reflected that divide. Financials benefited from higher-rate expectations, but pharmaceuticals, pulp and paper, and mining were among the weakest groups. Metal products and some materials-related shares also faced selling earlier in the day.
Nidec was the worst-performing major Prime Market stock, falling sharply and hitting a stop-low level. The move added to caution toward selected manufacturing and component-related names.
Money Forward was among the top gainers, showing that investors were still willing to buy selected software and digital-transformation names. However, the Growth Market 250 Index’s decline showed that smaller growth shares as a group remained under pressure.
The domestic policy backdrop remained important. The BOJ’s July 30-31 meeting minutes were part of the day’s schedule, and investors continued to assess how the central bank will manage the next phase of rate normalization.
The BOJ is trying to normalize policy without destabilizing the yen, bond market or equities. A faster rate path would support the yen and help contain imported inflation, but could push JGB yields higher and pressure households, borrowers and growth shares. A slower path would help equities in the short term but could revive yen weakness and inflation concerns.
Japanese government bond yields remain one of the biggest risks. The 10-year yield has recently moved above 3%, a level not seen since 1996. That has changed the investment environment for equities, banks, insurers, mortgages, corporate borrowing and public finances.
Higher yields support financial shares, but they also raise the discount rate applied to future earnings. That is particularly important for high-valuation AI, semiconductor and software shares.
Higher yields also increase the government’s debt-servicing burden. Prime Minister Sanae Takaichi’s administration is trying to support households, expand defense spending and fund long-term strategic investment while keeping fiscal credibility intact.
The government’s growth strategy calls for large-scale public and private investment through fiscal 2040 in semiconductors, artificial intelligence, energy security, defense, shipbuilding, robotics, space and other strategic sectors.
That strategy supports many of the sectors investors have favored this year, including chip equipment, advanced materials, optical networks, power systems, data centers and defense-related manufacturers. But higher interest rates make the funding question more difficult.
The Finance Ministry’s budget process remains closely watched because higher assumed interest rates increase projected debt-service costs. Investors want evidence that Japan can fund household relief and strategic industries without undermining confidence in public finances.
Dividend reinvestment was another key market factor. Some estimates pointed to about 1.6 trillion yen in futures buying related to dividend reinvestment from the September 28 close into the September 29 open. That could provide short-term support for the market, even though ex-dividend adjustments will mechanically weigh on many shares.
This creates a complicated setup for the next session. The ex-dividend drop may pull indexes lower, but reinvestment flows could cushion the decline. Investors will need to separate mechanical dividend effects from genuine selling pressure.
The Nikkei’s September 28 close at the day’s low was not encouraging, but the market remains well above its mid-September lows. The question is whether the rally can rebuild after the ex-dividend adjustment or whether the failed move above 67,000 marks a short-term peak.
TOPIX’s decline also matters. The broader index had caught up on September 25 when banks and dividend shares joined the rally, but it weakened again on September 28 despite strength in financials. That suggests the market’s breadth remains uneven.
A healthier market would need participation from financials, exporters, trading houses, industrials, domestic-demand shares and AI-related names. A rally dependent only on a few high-priced semiconductor stocks remains vulnerable.
The global backdrop remains mixed. U.S. shares rose strongly on September 25, with the Dow and Nasdaq both higher, but Japanese investors quickly shifted from following the overseas lead to taking profits after the Nikkei crossed 67,000.
U.S. yields remain important because they affect the dollar-yen rate, global equity valuations and the relative appeal of growth shares. Lower U.S. yields helped sentiment before the open, but Japan’s own high JGB yields remain a constraint.
U.S.-China developments and Middle East energy risks also remain important. Any improvement in U.S.-China trade tensions would help Japanese exporters and technology shares, while renewed friction could pressure supply-chain names. Any escalation in the Middle East could push oil higher and revive inflation concerns.
South Korean semiconductor shares will also remain a key signal. Overseas investors increasingly treat Japanese chip-equipment makers, South Korean memory producers, Taiwanese foundries and U.S. AI shares as one connected technology trade.
If Korean memory shares strengthen, Japanese names such as Kioxia, Tokyo Electron and Advantest may receive support. If Seoul weakens, Tokyo’s chip complex could face further profit-taking.
What to watch next: whether the Nikkei can stabilize after closing at 65,878, whether it can reclaim 66,000 after the ex-dividend adjustment, and whether TOPIX can recover from its weaker close.
Investors will monitor SoftBank Group, Advantest, Tokyo Electron, Kioxia, Ibiden, Fujikura, Furukawa Electric, Murata Manufacturing, TDK, Taiyo Yuden, Lasertec and Screen Holdings for signs of whether the AI trade can regain momentum after the September 28 reversal.
Banks and insurers will also remain important. Mitsubishi UFJ, Sumitomo Mitsui, Mizuho, Resona, Tokio Marine and other financials will show whether dividend demand and higher-rate expectations can continue to support value shares.
The yen near 157 to the dollar remains the most important domestic signal. Further weakness toward 160 would support exporters but revive intervention and inflation concerns. A rebound toward 153 would ease import costs but pressure exporters and carry trades.
JGB yields are the second key signal. A stable bond market would help equities, while another rise in 10-year or super-long yields would pressure valuations and fiscal policy.
Oil prices are the third signal. Lower crude would help households and companies, while a renewed surge would intensify pressure on the trade balance and inflation outlook.
September 28 showed that Tokyo’s rally remains fragile even after a strong five-day advance. The Nikkei briefly broke above 67,000, but profit-taking in AI and semiconductor shares dragged it to a weak close. Dividend demand and financial-sector buying provided support beneath the surface, yet the market will need broader participation to prove that the rebound can survive beyond the ex-dividend date.
