The Nikkei average plunged in response to the AI shock, but the strong corporate earnings outlook and decline in the TSE Prime Market's P/E ratio support the view that the market represents a buying opportunity over the long term.
The Nikkei average plunged in the first week of November, closing at ¥57,434 on the 6th. It fell ¥5,855, or 9.3%, over the period, and expectations of further market declines spread over the three-day period.
The market backdrop included the Republicans' major defeat in the US midterm elections, followed by declines in AI semiconductor-related stocks and a global stock-market sell-off. Some observers, however, noted that it took time for the defeat's impact to reach investor sentiment in the initial phase.
Crude oil futures temporarily fell to around $90, but losses have since eased amid uncertainty over the situation in the Middle East. Fluctuations in expectations for demand are expected to continue even after the Nikkei's plunge.
The forward P/E for the TSE Prime Market fell to 14.5x. Earnings momentum is expected to strengthen from January–March 2026 onward, and results for the July–September quarter are also expected to be strong, with forecasts likely to be raised. Although the market could continue to experience short-term shock-driven declines, some observers believe valuations have become increasingly attractive over the long term.