On 4 November, the Nikkei Average fell more than ¥3,000 at one point, but closed down ¥893 at ¥62,188. The results of the U.S. midterm elections and the outlook for the debate over AI regulation heightened market caution, leaving the Tokyo market at the mercy of overseas factors.
The Tokyo market was extremely volatile on 4 November. The Nikkei Average continued to fall from the morning, at one point recording a decline of more than ¥3,000. It approached the psychologically important ¥60,000 level, while excessive reactions and selling followed reports that the Democrats had secured both houses of Congress in the U.S. midterm elections. Expectations that this would trigger selling in semiconductor stocks also pushed the market lower, creating a period of notably weaker supply-demand conditions. Toward the close, movements in U.S. stock futures and comments by Mr. Trump narrowed the decline, and the Nikkei ended trading down ¥893.
The article analyzes the latest decline as an overreaction divorced from fundamentals. The issues of tighter regulation of AI and curbs on data-center construction are awaiting congressional deliberation, and the prevailing view is that they are unlikely to cause an abrupt halt. Many have pointed out that the market reaction stems from time differences and supply-demand dynamics, and that the nature of the Tokyo market, which is the first to absorb risk immediately after overseas events, remains unchanged.
Past examples include the 2016 U.S. presidential election and the United Kingdom's departure from the EU. A common factor is that uncertainty over election results affects the Japanese market through futures. However, it has also been noted that a rebound could occur depending on the stability of the U.S. market and movements in the dollar-yen exchange rate, while the vulnerability of the Japanese market is viewed as a long-term structural problem.