TOKYO - Tokyo's Nikkei 225 Stock Average closed at 61,077.90 on Thursday, November 5, falling 1,110.73 points, or 1.79%, from the previous session in its fourth consecutive daily decline, as heavy selling in semiconductor and artificial intelligence-related shares dragged the benchmark to its lowest closing level in about five and a half months, despite gains across much of the broader market.
The decline extended a losing streak that began on October 30, with the Nikkei shedding more than 3,500 points over four trading sessions. The benchmark opened at 62,384.73, briefly climbed to an intraday high of 62,653.98, and then came under sustained selling pressure, touching 60,786.19 shortly before the close. The latest decline followed a drop of 893.23 points on Wednesday, highlighting the sharp reversal in technology shares after their earlier rally.
The selloff was concentrated in companies closely associated with semiconductor manufacturing and AI investment. Advantest, a major supplier of semiconductor testing equipment, was the largest negative contributor to the Nikkei, reducing the index by approximately 1,097 points. Tokyo Electron, SoftBank Group, Ibiden and TDK also exerted substantial downward pressure, reflecting investor concerns about the outlook for technology spending and the sustainability of elevated valuations.
Market sentiment was affected by the November 3 U.S. midterm elections, in which the Democratic Party secured majorities in both houses of Congress, raising expectations that Washington could introduce tighter oversight of artificial intelligence development and data center construction. Investors responded by reducing exposure to Japanese semiconductor-related companies that have benefited from expectations of continued growth in global AI infrastructure investment.
Despite the Nikkei's steep fall, the broader Tokyo market presented a markedly different picture. The TOPIX index rose 45.01 points, or 1.16%, to close at 3,940.39, while 1,127 companies listed on the Tokyo Stock Exchange's Prime Market advanced, compared with 408 that declined and 11 that were unchanged. The divergence illustrated how losses in a small number of heavily weighted technology companies can dominate the price-weighted Nikkei even when most listed stocks are rising.
Automakers, real estate companies and other domestic-oriented businesses attracted buying interest, with transportation equipment recording the strongest performance among the exchange's 33 industry groups. Twenty-five sectors finished higher, while nonferrous metals, mining and shipping were among the weakest.
Toyota Motor was one of the strongest performers, with its shares surging 16.68% to 3,533 yen, their biggest one-day percentage gain since 1987, after the automaker reported stronger-than-expected earnings and raised its annual profit forecast. Operating profit for the July-September quarter climbed 34% to 1.13 trillion yen, supported by strong demand for hybrid vehicles and the benefits of a weaker yen. Toyota lifted its operating profit forecast for the fiscal year ending in March 2027 by approximately 15% to 3.9 trillion yen, while also expanding its planned share buyback to 1.3 trillion yen.
Toyota's performance highlighted the resilience of its hybrid-focused strategy, particularly in the United States, where demand for gasoline-electric vehicles has remained strong despite intense competition and uncertainty surrounding trade policy. The company has continued to face weaker demand in China, higher material costs and pressure from U.S. tariffs, but improved profitability and currency gains have helped offset these challenges. Toyota also announced plans to develop robotics as a future growth business, broadening its long-term investment strategy beyond automobile manufacturing.
Sony Group also reported strong earnings on November 5, announcing a 45% increase in second-quarter operating profit to 622.3 billion yen, comfortably exceeding market expectations of approximately 505 billion yen. The improvement was driven by stronger results in its gaming, entertainment and film businesses, including the commercial success of "Spider-Man: Brand New Day." Sony raised its full-year operating profit forecast by 9%, reflecting improved expectations for its semiconductor and music operations.
However, Sony's PlayStation business continued to face challenges in hardware sales. The company sold 2.6 million PlayStation 5 consoles during the quarter, compared with 4 million a year earlier, while rising memory-chip prices threatened to increase production costs. Sony said it had secured sufficient memory supplies to meet its projected sales for the fiscal year, providing some reassurance as competition for components intensifies because of demand from AI data centers.
Nintendo reported a more mixed performance, with operating profit for the July-September quarter declining 16% to 73.9 billion yen. For the six months through September, net profit increased 11% to 220.9 billion yen, although revenue fell 12% to 966 billion yen. The Kyoto-based company sold 6.49 million Switch 2 consoles during the first half and maintained its full-year sales target of 16.5 million units. Nintendo also retained its annual earnings forecast, despite rising component costs and concerns about the pace of new software releases.
Shares in Nintendo nevertheless advanced 6.31% to 8,880 yen, reflecting investor confidence in its console business ahead of the year-end holiday shopping season. The contrasting results from Sony and Nintendo illustrated the mixed conditions facing Japan's entertainment and electronics industries, where strong demand for digital content is being balanced against higher manufacturing costs and changing consumer spending patterns.
Elsewhere, Fast Retailing, the operator of Uniqlo, provided significant support to the Nikkei, contributing approximately 295 points to the benchmark's performance. Konami Group, Toyota, Terumo and Bandai Namco Holdings were also among the leading positive contributors, helping to offset part of the sharp decline in semiconductor shares.
Foreign exchange movements remained an important influence on Japanese equities. The yen strengthened against the dollar during Tokyo trading, with the U.S. currency falling from around 158.43 yen to approximately 157.82 yen before stabilizing near 157.90 yen in the afternoon. Lower U.S. Treasury yields and weaker crude oil prices contributed to dollar selling, while the steep decline in Japanese technology shares encouraged some investors to reduce risk.
The currency's movement presented mixed implications for Japanese businesses. A stronger yen can reduce the value of overseas earnings when converted into Japanese currency, affecting exporters and multinational manufacturers. However, it can also lower import costs for energy, raw materials and other goods, potentially benefiting businesses that depend heavily on overseas supplies.
Thursday's market performance also underscored growing concerns about the concentration of Japan's major stock benchmarks. A relatively small group of semiconductor and technology companies has accounted for an increasingly large share of Nikkei movements, making the index vulnerable to sharp swings in global sentiment toward AI investment. Advantest alone accounted for almost the entire net decline in the Nikkei on November 5, even though more than 70% of Prime Market stocks finished higher.
Investors will now be watching whether buying interest in automobiles, consumer businesses and other sectors can offset further selling in semiconductor shares. Corporate earnings announcements remain a central focus, with results from major manufacturers and consumer companies providing fresh indications of how Japanese businesses are managing currency volatility, international trade uncertainty and rising production costs.
The sharp divergence between the Nikkei and TOPIX suggests that Thursday's decline reflected a concentrated reassessment of technology valuations rather than a uniform deterioration across Japanese equities. Nevertheless, with the Nikkei falling for four consecutive sessions and ending at its lowest level since May 20, the outlook for Tokyo stocks remains sensitive to developments in U.S. technology regulation, global semiconductor demand and the direction of the yen.
