Japan’s Nikkei Surges 2.5% to Three-Month High, Driven by AI Stock Rally
Japan’s Nikkei index surged over 2% on Monday, reaching 70,037.61, its highest level in three months. The broader Topix index also saw gains, climbing 1.16% to 4,138.57. The rally was largely driven by chip-related companies, with Tokyo Electron rising 5.7% and Advantest increasing by 4.5%. However, memory maker Kioxia only managed a modest gain of 0.49%, remaining nearly 50% below its mid-June record high.
Investors showed strong interest in AI-related stocks, although market sentiment appeared more cautious compared to earlier this year when the Nikkei hit its peak. Mamoru Shimode, chief strategist at Resona Asset Management, noted that while the AI rally is expected to continue, investors are likely to be more selective. He suggested that Kioxia’s limited gains might be due to selling pressure from investors who had incurred losses.
Wall Street gains lift Japan stocks
The rise in Japanese equities followed a positive trend in U.S. stocks on Friday, driven by weaker-than-expected jobs data that reduced the likelihood of a Federal Reserve rate hike this month. Japanese financial stocks also gained, with Mitsubishi UFJ Financial Group rising 0.99% and Mizuho Financial Group increasing by 1.86%. Within the Topix, growth shares climbed 1.46%, while value shares rose by 0.89%. Overall, 53% of the more than 1,500 stocks on the Tokyo Stock Exchange’s prime market advanced, while 42% declined.
30-year bond yield hits record high
Despite the equity rally, Japan’s bond market faced pressure, with the 30-year government bond yield reaching a record 4.235%. Investors are closely monitoring Prime Minister Sanae Takaichi’s policy speech scheduled for later on Monday, which may provide insights into the government’s economic stance. Takaichi’s remarks are particularly significant amid reports of her commitment to respond flexibly to unexpected economic developments.
Market participants are also looking for indications of a potential shift in her reflationary policy, especially in light of U.S. pressure to address the yen’s weakness. Masahito Sugawara, a senior strategist at Daiwa Securities, indicated that current yield levels reflect expectations for a policy shift. However, any indication from Takaichi to maintain her expansionary policy could lead to further increases in bond yields.
What is keeping bond market under pressure
Concerns are mounting that Takaichi’s ambitious spending plans could negatively impact Japan’s fiscal position, adding pressure to the government bond market since she took office a year ago. The sell-off has primarily affected longer-dated debt, while yields on shorter-dated bonds have decreased. The two-year JGB yield fell 1.5 basis points to 1.9%, and the 10-year bond yield dropped 2 basis points to 3.08%.
The pressure on Japanese government bonds is part of a broader trend in global government debt markets. Rising energy prices, persistent inflation worries, and expectations of higher interest rates have contributed to increasing yields worldwide. U.S. Treasury yields also reversed earlier declines over the weekend as investors reacted to the weaker-than-expected September jobs report, which tempered expectations for further Federal Reserve interest rate hikes.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
