Japanese Shares Fall as Banks Track US Peers Lower, Yen Gains Also Weigh (Update 1)

Reuters

12:01 JST, October 17, 2025 (updated at 16:52 JST)

TOKYO, Oct 17 (Reuters) – Japanese shares fell on Friday, as bank shares declined on signs of credit stress at U.S. regional banks, and as a stronger yen hurt sentiment.

The Nikkei .N225 slipped 1.44% to close at 47,582.15 and the broader Topix .TOPX fell 1.03% to 3,170.44.

The Nikkei volatility index .JNIV, a gauge of investor anxiety, rose to a six-month high, reflecting investor demand for protection against drops in the stock market.

“This is a typical move when the sentiment is jolted by credit concerns,” said Shuutarou Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory.

“As the yen strengthened toward the end of the session, the Nikkei extended losses,” he said.

Overnight, U.S. regional bank Zions Bancorporation ZION.O tumbled 13% after it disclosed an unexpected loss on two loans in its California division. .N

In Japan, Mitsubishi UFJ Financial Group 8306.T and Sumitomo Mitsui Financial Group 8316.T declined 3% each.

The Topix banking index .IBNKS.T lost 2.99%, the second worst performing index after the insurance sector .IINSU.T, which fell 3.17%.

Technology investor SoftBank Group 9984.T, which drove the Nikkei’s latest rally, lost 3.36%.

The Nikkei saw a roller coaster move this week over political uncertainties. It slipped 2.6% on Monday following the departure of the Liberal Democratic Party’s long-term partner Komeito from the coalition.

The index rose 3% in the previous two sessions after a small opposition emerged as a possible coalition partner for the LDP.

The index lost 1% for the week.

“Japan’s market showed signs of overheating in past sessions and some investors feared that it could peak any time,” said Takamasa Ikeda, senior portfolio manager at GCI Asset Management.

Ikeda, who was looking for cues to book profits, sold all of his long position in the Nikkei futures on Friday last week after seeing signs of weakness in U.S. shares.

“And the news about the Komeito’s departure broke,” he said.