Japanese Shares Rebound After AI-Driven Selloff

The Nikkei 225 jumped more than 3% to above 59,000 on Monday, recovering part of last week’s steep losses as investor sentiment improved, with financial and consumer-related stocks leading the gains. Major banking stocks advanced, including Mitsubishi UFJ (4.6%), Sumitomo Mitsui (4.2%) and Mizuho Financial (4.8%). Retailers and automakers also posted solid gains, with Fast Retailing rising 2.7%, Nintendo gaining 3.4% and Toyota Motor climbing 2.1%. Last week, the Nikkei plunged more than 9%, marking its largest weekly decline since the COVID-19-driven market rout in March 2020. The selloff followed a Democratic sweep in the US midterm elections, which fueled concerns over tighter AI industry regulations and a possible slowdown in data center expansion. Given their significant exposure to the global AI infrastructure boom, Japanese technology companies remain particularly vulnerable to renewed weakness in the sector.

The Nikkei 225 Index plunged 5.96% to close at 57,435 on Friday, sinking to its lowest levels since April and pushing weekly losses beyond 9%. This represented its worst weekly performance since the Covid-driven market selloff in March 2020. Technology stocks spearheaded the decline after a sweeping Democratic victory in the US midterm elections sparked concerns about stricter AI industry regulations and a potential slowdown in data center expansion. Japanese AI-related stocks recorded significant weekly losses due to their substantial exposure to the global AI infrastructure buildout, with Kioxia Holdings falling 36.8%, Advantest dropping 19.6%, Taiyo Yuden declining 22%, Tokyo Electron losing 13.2%, and SoftBank Group sliding 20.8%. Meanwhile, data revealed that nominal wages in Japan rose at their fastest pace in nearly three decades, strengthening expectations of another Bank of Japan interest rate hike in December.

The Nikkei 225 Index dropped 3528 points or 5.78 percent on Friday to close at 57550 points. Losses were led by Ajinomoto (-12.50%), Yamaha (-12.27%) and Sumitomo Dainippon (-12.12%).