TOKYO - Japan's Nikkei 225 Stock Average fell about 429 points, or 0.7%, to close near 60,819 on Thursday, November 12, ending a three-day winning streak as reports concerning Nvidia chief executive Jensen Huang triggered heavy selling in semiconductor-related shares, while the broader TOPIX index edged 0.2% higher to around 3,937.
ed packaging substrates used in high-performance processors, dropped around 10%.
Ibiden's close relationship with Nvidia made it particularly vulnerable to concerns about the American chipmaker. In its previous financial year, Nvidia-related sales reportedly exceeded 120 billion yen, accounting for approximately 30% of Ibiden's total revenue.
Huang has previously emphasized the importance of Ibiden's advanced packaging technology to Nvidia's operations. During a visit to Japan in July, he was reported to have told Ibiden President Kawashima that Nvidia had little choice but to rely heavily on the Japanese supplier.
The scale of that relationship intensified concerns that uncertainty over Nvidia's management could eventually affect orders, product development and investment plans throughout its international supply chain.
Selling also spread to SoftBank Group and Kioxia Holdings, both of which have been closely associated with the artificial intelligence and semiconductor investment boom. Their declines contributed to the Nikkei's retreat as investors reduced exposure to technology companies after the market's recent recovery.
The selling pressure came as global investors were already questioning whether the enormous investments being made in artificial intelligence infrastructure would generate sufficient earnings to justify elevated share prices. Although demand for advanced chips remains substantial, the valuations of many AI-related companies leave them vulnerable to sudden changes in expectations.
The mood contrasted sharply with the previous session on Wall Street, when the Dow Jones Industrial Average gained 254.60 points to 52,486.49 and the Nasdaq Composite advanced 1.6% to 25,466.19. The Philadelphia Semiconductor Index rose 5.66%, supported by renewed optimism surrounding artificial intelligence investments and financial results from cloud infrastructure company CoreWeave.
Despite the technology selloff, investors continued buying companies reporting stronger earnings and improved shareholder returns.
Itochu Corporation attracted attention after its shares reached a record high, reflecting confidence in the trading house's diversified business model and its comparatively limited dependence on fluctuations in natural resource prices.
Itochu reported a 16% increase in net profit for the first half of its financial year, reaching a record high. Strong performances in non-resource businesses, including machinery and textiles, were particularly well received by investors.
The results reinforced Itochu's reputation for generating stable profits through a broad portfolio of consumer, industrial and service businesses rather than relying heavily on commodity prices.
Mitsui & Co. also raised its full-year earnings forecast earlier in November, although investors viewed much of the improvement as a consequence of higher resource prices. Concerns surrounding the company's energy investments in Russia, including the Sakhalin liquefied natural gas projects, continued to weigh on sentiment.
The comparison highlighted a growing preference among some investors for trading houses capable of delivering earnings growth without depending primarily on commodity markets.
Construction companies were another major source of strength, with Daiwa House Industry, Taisei Corporation and Raito Kogyo attracting buying interest following favorable earnings announcements and improved shareholder return plans.
Daiwa House raised its year-end dividend forecast and indicated that its expected decline in annual net profit would be smaller than previously anticipated. Investors welcomed the improved outlook, which suggested that the company was managing higher construction costs more effectively than feared.
Raito Kogyo, a specialist in slope protection, foundation improvement and infrastructure engineering, revised its full-year forecast from an expected decline in sales and profits to growth in both measures. The company also raised its dividend forecast, sending its shares approximately 10% higher.
Taisei Corporation similarly improved its earnings outlook, replacing an earlier forecast for declining annual pretax profit with expectations for results broadly in line with the previous year. The company also announced a dividend increase and a share buyback program, extending buying interest following its earnings announcement.
Construction stocks had previously suffered substantial declines as investors worried about rising material prices, labor shortages and higher energy costs following the escalation of conflict involving the United States and Iran.
However, recent earnings suggested that some major contractors were succeeding in passing higher expenses on to customers through price increases and improved project management, helping restore profitability.
The renewed interest in construction shares also reflected expectations for continued demand from infrastructure maintenance, redevelopment projects, industrial facilities and other capital investment.
Currency movements remained another major influence on Tokyo trading as the dollar approached 160 yen, reaching its strongest level against the Japanese currency in approximately two months.
The yen's weakness followed stronger-than-expected U.S. consumer inflation data for October, which increased expectations that the Federal Reserve would raise interest rates at its December policy meeting.
According to market pricing discussed during Thursday's session, approximately 90% of investors expected a quarter-percentage-point increase in U.S. interest rates, while the remaining 10% anticipated a half-point increase.
The prospect of higher American interest rates, combined with a more cautious monetary policy outlook in Japan, supported the dollar and widened expectations for the interest rate differential between the two countries.
U.S. 10-year Treasury yields had again approached or exceeded 5%, reinforcing concerns that rising borrowing costs could place additional pressure on highly valued technology shares.
In Japan, comments from a Bank of Japan policy board member added to downward pressure on the yen. Speaking at a business gathering, the official indicated that private consumption was not necessarily strong and warned of risks to underlying inflation.
The policymaker also emphasized the need to pay careful attention to the pace of any future interest rate increases. Investors interpreted the remarks as relatively cautious about further monetary tightening, encouraging additional yen selling.
Japanese financial authorities responded with a stronger warning about the currency's rapid decline.
Atsushi Mimura, Japan's vice finance minister for international affairs, told reporters that recent exchange rate movements appeared excessively rapid. He also referred to the coordinated Japanese and American currency intervention in July, warning market participants against forgetting the events of the summer.
The remarks were interpreted as a signal that authorities remained prepared to respond to excessive currency volatility, particularly as the dollar moved closer to the psychologically important 160-yen level.
Although a weaker yen normally supports Japanese exporters by increasing the value of overseas earnings when converted into yen, the response among automobile manufacturers was mixed.
Honda shares remained under pressure following an earnings announcement that included a downward revision to its outlook, while Nissan Motor fell sharply after reporting another difficult financial period.
Nissan's shares declined around 5% during Thursday's session after the company reported a net loss for the first half of its financial year for the second consecutive year.
The automaker continued to face pressure from higher raw material costs, weak sales volumes and difficulties improving profitability despite efforts to restructure its operations.
Investors also expressed concern that Nissan could fall short of its full-year financial targets, even after allowing for the potential effects of U.S. tariffs and other external pressures.
The company is counting on new vehicle launches and restructuring measures to support a recovery, but the benefits have yet to become sufficiently visible in its financial results.
Nissan's shares had already fallen to their lowest level in approximately six months earlier in November, and Thursday's decline brought renewed attention to the company's depressed valuation.
Its price-to-book ratio had fallen below 0.2, indicating that the stock was trading at less than one-fifth of the company's reported net asset value. Such a low valuation reflected deep investor skepticism about Nissan's ability to restore sustainable profitability.
While Nissan struggled, semiconductor materials producer Resonac Holdings emerged as one of the market's strongest performers after announcing a substantial upward revision to its earnings forecast.
The company said it now expected core operating profit of 250 billion yen for the financial year ending December 2026, approximately 2.4 times the previous year's result and 54 billion yen above its earlier forecast.
Resonac also raised its annual revenue outlook to 1.235 trillion yen, an increase of 18% from the previous year.
The improvement was driven primarily by strong demand for advanced semiconductor materials, including copper-clad laminates used in semiconductor packaging substrates.
Demand for materials used in advanced processors and artificial intelligence infrastructure has remained strong, providing substantial support for manufacturers positioned within specialized segments of the semiconductor supply chain.
Resonac shares surged as much as 23% during morning trading before surrendering some of their gains, although they remained sharply higher during the afternoon.
The rally was particularly notable because Resonac had previously suffered selling pressure alongside other artificial intelligence-related companies, despite continuing improvements in its underlying business performance.
Investors also welcomed progress in the company's restructuring program, which is designed to concentrate management resources on semiconductor and electronic materials while reducing exposure to less profitable operations.
Resonac announced plans to sell its graphite electrode business in Japan, the Americas and Europe, with the transaction expected to proceed during the April-to-June quarter of 2027.
The company also confirmed plans to withdraw from its lithium-ion battery anode materials business, further narrowing its focus on higher-growth operations.
Its latest restructuring steps followed the recent separation and listing of a petrochemical business on the Tokyo Stock Exchange's Standard Market.
The combination of strong earnings, asset sales and a clearer business strategy raised expectations that Resonac could accelerate growth in its core semiconductor materials operations.
The divergence between Resonac's gains and the heavy losses at Advantest and Ibiden illustrated the selective nature of investor demand within the technology sector. Companies delivering substantial earnings improvements continued to attract buyers, even as broader concerns about Nvidia triggered selling across the industry.
The Tokyo Stock Exchange's Growth Market 250 Index was another weak performer, falling more than 3% and ending a three-day advance as investors moved away from smaller, higher-risk growth companies.
Rising American bond yields and expectations for further U.S. monetary tightening added to pressure on growth stocks, whose valuations are particularly sensitive to changes in interest rates.
The weakness reflected broader concerns about global financial conditions, including the possibility that higher borrowing costs could undermine investment in technology infrastructure and other capital-intensive businesses.
CoreWeave remained under scrutiny despite its recent positive earnings announcement. Investors continued to question the financial risks associated with the massive spending required to build artificial intelligence data centers, particularly among companies operating with substantial capital requirements and continuing losses.
The combination of elevated American interest rates, uncertainty surrounding Nvidia and renewed volatility in Asian technology stocks created a challenging environment for Tokyo investors.
Geopolitical developments added to the uncertainty, including reports concerning Russia's temporary administration of Japan Tobacco's local operations and continuing tensions among the United States, China and Russia.
These developments reinforced concerns about the vulnerability of multinational businesses to political disputes, sanctions and changes in international trade relationships.
The latest session also demonstrated that a weaker yen was no longer sufficient to lift the broader Japanese stock market. Although currency depreciation can support exporters, the benefits were overshadowed in several sectors by concerns about earnings, higher costs and global financial instability.
Investors are now increasingly distinguishing between companies benefiting directly from currency movements and those facing more fundamental business challenges.
The Nikkei's failure to sustain its morning rally also suggested that the market had not yet established a convincing recovery from the sharp declines earlier in November.
After rebounding by more than 3,800 points over three sessions, the index encountered renewed selling pressure as investors took profits and reduced risk exposure.
The 200-day moving average remained an important technical reference point, with the Nikkei struggling to maintain upward momentum near that level before retreating toward 60,000.
At the same time, the positive performance of the TOPIX and the strength of construction companies, trading houses and selected materials manufacturers indicated that investors had not withdrawn broadly from Japanese equities.
Instead, the market appeared to be undergoing a rotation in which investors favored companies with improving earnings, stronger shareholder returns and less dependence on speculative expectations for future artificial intelligence growth.
Attention now turns to Thursday night's trading on Wall Street, particularly the market's response to the Nvidia reports and movements in U.S. Treasury yields.
Investors will also be watching whether the dollar breaches 160 yen, potentially prompting stronger warnings or intervention from Japanese financial authorities.
The next Federal Reserve policy meeting, further Japanese corporate earnings announcements and signals from the Bank of Japan are expected to remain major influences on trading.
For Tokyo investors, the immediate challenge is whether buying in traditional industries can continue to offset weakness in technology shares, or whether renewed global uncertainty will push the Nikkei back toward the 60,000 threshold after its short-lived recovery.
Source: CNBC
