Japan’s Nikkei Falls over 2% as Chip Shares Slump, Yen Firms

Yomiuri Shimbun file photo
Tokyo Stock Exchange

TOKYO (Reuters) – Japan’s Nikkei share average lost more than 2% on Monday, as chip-related stocks tracked their U.S. peers lower, while the yen’s strength also weighed on sentiment.

The Nikkei had lost 2.48% to 38,704.10 by the midday break, its biggest daily decline since December 2022 if current trend holds.

The broader Topix lost 2.25% to 2,665.37.

“U.S. chip stocks fell at the end of last week, which helped the Nikkei to enter a correction phase,” said Shuji Hosoi, senior strategist, Daiwa Securities.

The S&P 500 and Nasdaq closed lower on Friday, after touching record highs during the session, with high-flying chip stocks reversing course.

The Philadelphia Semiconductor index lost 4% on Friday, with Nvidia becoming the biggest drag.

“Japanese equities were also hurt by the stronger yen. This trend will probably continue until the Bank of Japan (BOJ) concludes its policy meeting last week.”

The yen strengthened against the dollar as signs the BOJ will exit negative interest rates at its policy meeting next week, contrasted with expectations for the U.S. Federal Reserve to cut rates in June.

A growing number of BOJ policymakers are warming up to the idea of ending negative interest rates this month on expectations of hefty pay hikes this year, four sources familiar with its thinking said.

Japan’s benchmark 10-year government bond (JGB) yield hit a one-month high of 0.76% in early trade. Expectations for narrowing gap in yields between Japan and the U.S. propped up the yen.

Chip-equipment maker Tokyo Electron lost 4.61% and chip-testing equipment maker Advantest fell 6.62%.

All but two of the 33 industry sub-indexes on the Tokyo Stock Exchange fell, with energy explorers losing 4.88% to become the worst performer.

The banking index, which is typically strong amid rising yields, lost 3.63%, with Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group slipping 3.71% and 3.87%, respectively.