Japan’s Nikkei 225 surged above 66,000 on Thursday as investors piled into AI and semiconductor shares after Tokyo reopened from a holiday, but the headline gain overstated the broader market’s strength.
The Nikkei was up 1.8% at 66,167 around 10:09 am before easing to a 1.33% gain by midday. The Topix was only 0.12% higher.
Advantest, SoftBank Group and Ibiden alone added roughly 800 points to the Nikkei at one stage, showing how heavily the move depended on a small group of technology names.
AI names did most of the lifting
Advantest rose about 4%, SoftBank Group gained roughly 6% early in the session and Ibiden jumped more than 15%. At 10 am, the three stocks contributed about 796 points to the Nikkei’s 1,148-point advance.
The catch-up move followed strong gains in global technology and semiconductor shares while Tokyo was closed.
Hu You, senior research analyst at iFast Financial, told Bloomberg before the open that the semiconductor-heavy Nikkei was likely to take its cue from global technology strength.
She also highlighted Japan’s exposure to semiconductor materials and advanced packaging.
The breadth was not outright weak. At 10 am, 877 Prime Market stocks were higher and 611 lower, with 18 of 33 sectors advancing. But the Nikkei’s construction magnified gains in a handful of expensive stocks.
The Topix told a different story
The difference between the Nikkei and Topix remained striking by midday: 1.33% against just 0.12%.
The Topix covers a broader slice of corporate Japan, while the price-weighted Nikkei can be moved sharply by a relatively small number of high-priced shares.
Thursday’s divergence therefore suggested that enthusiasm for AI was much stronger than enthusiasm for Japanese equities generally.
That gap matters because the Nikkei can look stronger than the underlying market when heavyweight technology shares rise together.
Capital Economics’ Thomas Mathews told Barron’s that the recent drop in technology shares’ relative valuations did not mean the AI bubble had burst. He argued that another technology-led rally remained possible, particularly if oil and bond yields fell.
That condition matters because Japanese yields were moving the other way.
The benchmark 10-year government bond yield rose eight basis points to 3.055%, its highest since 1996.
The move followed last week’s Bank of Japan rate increase to 1.25% and another sharp rise in US Treasury yields.
Higher yields are the risk behind the rally
Bank shares weakened, with Mitsubishi UFJ, Sumitomo Mitsui Financial Group and Mizuho all lower around midday, while the Topix value index slipped even as growth shares advanced.
Higher borrowing costs do not automatically derail Japanese equities.
JPMorgan strategists led by Mislav Matejka said this week that, absent a significant growth slowdown, corporate profitability should continue to benefit from improving productivity. The bank also pointed to strong balance sheets and healthy margins as cushions against higher yields.
But Thursday’s market still exposed a clear split.
AI-linked companies were strong enough to push the Nikkei sharply higher, while the broader market barely moved as investors absorbed a 3%-plus government bond yield and a yen near 158 per dollar.
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