TOKYO - Japan's benchmark Nikkei 225 index enters trading on November 2 after closing at 63,290.11 on October 30, down 1,369.36 points, or 2.12%, in its final session of October, as selling in artificial intelligence and semiconductor-related stocks raised concerns about the sustainability of the technology-led rally, while investors prepared for a shortened trading week dominated by corporate earnings, monetary policy developments and the US midterm elections.
The sharp decline on October 30 followed three consecutive sessions of gains and reflected renewed uncertainty over the enormous capital expenditure required to support the global expansion of artificial intelligence. Japanese semiconductor stocks were particularly vulnerable to weakness in US technology shares, while some domestic-oriented companies showed greater resilience.
The Nikkei ended October down 5.19% from its September 30 close of 66,753.72, while the broader TOPIX index declined 3.49% over the month to 3,965.07. The reversal followed a strong start to October, when the Nikkei climbed above 70,000 before investors began reassessing valuations and the earnings outlook for AI-related businesses.
Despite the turbulence, Japanese stocks have shown substantial differences in performance between sectors. Semiconductor manufacturers, testing equipment companies and suppliers to the global technology industry have experienced pronounced swings, reflecting uncertainty over the pace and profitability of AI investment. Domestic businesses, including some consumer and pharmaceutical companies, have attracted buyers seeking alternatives to highly valued technology shares.
The Bank of Japan remains another important influence on financial markets after leaving its benchmark policy rate unchanged at approximately 1.25% at its October 30 policy meeting. Investors are assessing whether persistent inflation, wage developments and changes in the yen could encourage further tightening, particularly as higher borrowing costs affect corporate investment, household consumption and government debt financing.
The central bank is scheduled to release the full text of its October Outlook for Economic Activity and Prices at 2 p.m. on November 2, providing additional detail on policymakers' assessment of inflation, economic growth and financial conditions. The report is likely to attract attention from currency and bond market participants looking for indications of the timing of any subsequent interest rate adjustment.
Corporate earnings will also play a central role in determining market direction. Kyocera is scheduled to report financial results on November 2, while major announcements later in the week include Mitsubishi Corp. and Itochu on November 4, followed by Toyota Motor, Nintendo and Nippon Steel on November 5 and Mitsubishi Heavy Industries on November 6.
The reporting season is particularly significant for Japanese manufacturers, which face changing foreign exchange conditions, higher financing costs and uncertainty over demand in major overseas markets. Investors are watching whether companies can maintain profit margins through price increases, improved productivity and cost reductions.
The semiconductor industry is expected to remain a focus as companies involved in advanced chipmaking equipment and memory products assess the strength of demand from AI data centers. Although investment in computing infrastructure continues to generate substantial orders, questions about the scale and financing of future projects have contributed to sharp fluctuations in technology shares.
International political developments could add to volatility. The United States holds its midterm elections on November 3, when Japanese financial markets will be closed for the Culture Day national holiday. Investors will therefore have to wait until November 4 to react in regular Tokyo trading to developments during the holiday, potentially amplifying movements in equities and foreign exchange markets.
The week will also feature US manufacturing and employment data, including the October employment report scheduled for November 6, which could influence expectations for Federal Reserve monetary policy and the dollar-yen exchange rate.
Market strategists anticipate continued volatility, with one published forecast placing the Nikkei's potential trading range for the November 2-6 week between 61,000 and 65,000. The outlook reflects the possibility of a rebound following October's heavy selling, balanced against continued uncertainty over technology valuations, economic policy and international developments.
For Japanese businesses, the coming week will provide an important test of whether underlying corporate earnings can support share prices after the retreat from October's highs. Investors are likely to distinguish increasingly between companies delivering measurable profits from AI-related investment and those whose valuations depend heavily on expectations of future growth.
As of 7:37 a.m. Japan time on November 2, Tokyo's cash market has not yet opened, so this preview uses the confirmed October 30 closing figures rather than unverified opening prices. The official Bank of Japan publication schedule and corporate earnings calendars confirm the principal events ahead.
