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Japan’s Nikkei share average fell sharply on Thursday, driven by a global sell-off in chip-related stocks and a strengthening yen. The Nikkei (NI225) dropped 2% to 40,277.86 by the midday break, dipping earlier to 40,112.56, the lowest since July 2. This fall came just a week after it reached a record high of 42,426.77.
Picture: Japan’s Nikkei sees a decline on the VT Markets app.
Volatility spiked to its highest level since May 9. Chip-making-equipment giant Tokyo Electron (8035) was the biggest drag on the Nikkei, tumbling 9.5%. Other major decliners included Disco (6146) and Screen Holdings (7735), which skidded 9% and 8.5%, respectively.
The broader Topix index (TOPIX) fell 0.93%, with a sub-index of growth shares sliding 1.4% and a value share gauge losing 0.5%. U.S. chip shares sold off sharply overnight, with the Philadelphia SE Semiconductor Index (SOX) sliding 6.81% due to potential tighter curbs on exports of advanced semiconductor technology to China.
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Remarks from Republican presidential nominee Donald Trump, suggesting that Taiwan should pay the U.S. for its defense, further deepened the rout. Among the Tokyo Stock Exchange’s 33 industry groups, electric machinery—which includes Tokyo Electron—was the worst performer, dropping 2.8%, followed by precision machinery at 2.7%, and machinery at 2.4%.
Weakness in chip shares is expected to keep the Nikkei down for the day. However, earnings reports from Taiwan chip giant TSMC (2330) and Disco could influence market movements in the near future.
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The transport equipment sector also declined, with the yen surging from 161.81 per dollar on July 10 to 155.375 on Thursday. A stronger yen reduces the value of exporters’ overseas revenues. Consequently, Toyota Motor (7203) fell 2.6%, Nissan (7201) dropped 1.5%, and Mazda (7261) tumbled 4.2%.
The current market scenario underscores the vulnerability of the Nikkei to both global tech sector trends and currency fluctuations. As the earnings season kicks off next week, market participants will be keenly watching for performance differentiation among stocks, particularly in the tech and export-oriented sectors.
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