TOKYO - Japanese stocks extended their recovery on October 28, with the Nikkei 225 closing at 63,954.19 at 3:30 p.m. Tokyo time, up 685.82 points, or 1.08%, from the previous session, as strong demand for artificial intelligence-related semiconductor shares lifted the benchmark for a second consecutive day, even as the broader market weakened ahead of major interest rate decisions in Japan and the United States.
The rally was driven by a concentrated group of technology stocks, highlighting the growing influence of semiconductor manufacturers and equipment suppliers on Japan's equity market. The Nikkei briefly climbed above 64,300 during afternoon trading, reaching an intraday high of 64,308.71 before surrendering some gains toward the close.
The broader TOPIX index moved in the opposite direction, falling 0.14% to 3,991.71, while declining stocks outnumbered advancing shares by more than two to one on the Tokyo Stock Exchange's Prime Market. The divergence illustrated how the strength of a small number of heavily weighted technology companies was masking weakness across much of corporate Japan.
Semiconductor testing equipment maker Advantest made the largest positive contribution to the Nikkei, adding approximately 231 points to the index, followed by Tokyo Electron with nearly 210 points and SoftBank Group with about 168 points. Memory chip producer Kioxia Holdings surged 13.76%, while electronic components manufacturer Ibiden gained 7.94% and chipmaker Renesas Electronics advanced 7.47%.
The buying followed gains on Wall Street on October 27, when the technology-heavy Nasdaq Composite rose 1.18%, reinforcing expectations that investment in artificial intelligence infrastructure would continue supporting demand for Japanese semiconductor equipment, memory chips and advanced electronic components.
The recovery represented a partial reversal of the losses recorded earlier in October, when Japanese equities retreated sharply from their highs. The Nikkei had closed at 62,189.65 on October 26 before rebounding over the following two sessions, although the benchmark remained below the levels reached at the beginning of the month.
Market weakness was evident outside the technology sector. Konami Group, Canon and Nitto Denko were among the day's notable decliners, while insurance, food manufacturing and oil-related stocks also faced selling pressure. Only 10 of the Tokyo Stock Exchange's 33 industry groups recorded gains.
The foreign exchange market remained relatively stable despite the rise in Japanese equities. The yen traded at 157.78 to 157.80 against the dollar at 5 p.m. Tokyo time, strengthening slightly from the previous day. Against the euro, the Japanese currency stood at 175.49 to 175.53. Traders were reluctant to take large positions ahead of the Federal Reserve's policy announcement and the Bank of Japan's two-day monetary policy meeting beginning October 29.
The BOJ's October 29-30 meeting was expected to provide fresh guidance on the outlook for interest rates, inflation and economic growth. Investors were particularly focused on whether policymakers would signal further monetary tightening, given persistent price pressures and the effects of the weaker yen on imported energy, food and industrial materials. The central bank was scheduled to publish its latest economic outlook on October 30, followed by a news conference.
In one of the day's most significant corporate developments, Advantest announced after the market close that it had raised its earnings forecast for the fiscal year ending March 2027, reflecting accelerating global demand for semiconductor testing equipment used in artificial intelligence applications.
The company lifted its annual revenue projection from 1.714 trillion yen to 1.863 trillion yen, an increase of 65.1% from the previous fiscal year. Its forecast for annual net profit was raised from 660 billion yen to 741.5 billion yen, representing a projected year-on-year increase of 97.5%.
Advantest reported revenue of 845.2 billion yen for the six months through September, up 60.5%, while net profit more than doubled to 368.1 billion yen. The company also announced a share repurchase program worth up to 280 billion yen, covering as many as 11 million shares, alongside an interim dividend of 49 yen per share.
The results provided further evidence that the global expansion of AI computing infrastructure is creating substantial opportunities for Japanese technology manufacturers. Demand for advanced chip testing systems has increased as semiconductor producers develop more powerful processors and high-bandwidth memory products for AI servers and data centers. Advantest's shares climbed 3.16% during regular trading and rose further in after-hours transactions following the announcement.
Tokyo Electron Device also reported strong earnings, doubling its recurring profit for the April-September period to 7.35 billion yen. The company raised its full-year recurring profit forecast by 17.6% to 16 billion yen, putting it on course for its highest earnings in three years. It also increased its planned annual dividend from 129 yen to 151 yen per share.
The earnings upgrades contrasted with continued uncertainty in other parts of the corporate sector. Japanese electric motor manufacturer Nidec disclosed that it had been unable to submit corrected financial reports accompanied by an auditor's opinion by its October 28 target date, as investigations into accounting irregularities continued.
The company said it intended to submit a report on its internal controls to the Tokyo Stock Exchange on October 30. Nidec has been under special monitoring since October 2025 following disclosures of potentially inappropriate accounting practices within the group, and its inability to secure an audit opinion has raised concerns about its continued listing.
Beyond corporate earnings, the government's latest economic assessment presented a mixed picture of Japan's recovery. In its monthly report released on October 27, the Cabinet Office maintained its assessment that the economy was recovering moderately, supported by improving employment and household income conditions, although it warned that developments in the Middle East remained a significant source of uncertainty.
The government downgraded its assessment of exports, saying the recovery had recently shown signs of stalling. At the same time, it upgraded its assessment of business sentiment, reporting signs of improvement across companies. Private consumption continued to recover, capital investment remained on an improving trend, and employment conditions showed further signs of strengthening.
The contrasting indicators underscored the challenges facing policymakers. Although major exporters and technology companies have benefited from overseas demand and the weaker yen, domestic businesses continue to contend with higher operating costs, persistent consumer price increases and uneven household spending.
Investors were also watching developments in global commodity markets, where elevated oil prices remained a potential threat to Japan's import-dependent economy. Rising energy costs could put renewed pressure on household budgets and corporate profitability, particularly among transportation companies, manufacturers and smaller businesses with limited ability to pass higher costs on to customers.
Japan's 10-year government bond yield stood at approximately 2.83%, reflecting expectations for monetary policy and inflation. Higher borrowing costs remain an important consideration for businesses planning capital expenditure, as well as for the government, given Japan's substantial outstanding public debt.
The divergence between the Nikkei and TOPIX on October 28 highlighted the increasingly uneven nature of Japan's equity market. While investment related to artificial intelligence is producing exceptional earnings growth among selected technology companies, the broader economy remains exposed to weaker export momentum, elevated energy costs and uncertainty over interest rates.
Attention was set to shift to the Bank of Japan's October 30 policy announcement and the next round of corporate earnings, with investors looking for evidence that Japan's stock market recovery could extend beyond semiconductor shares into a broader range of industries.
