The Nikkei edged lower in morning trading on the Tokyo Stock Exchange on the 28th, with the midday close at 66,333.53 yen. Buying of AI and semiconductor stocks led the market initially, but profit-taking and weaker South Korean stocks subsequently weighed on the market.
The Nikkei edged lower in morning trading on the Tokyo Stock Exchange on the 28th. The midday close was 66,333.53 yen, down 30.67 yen, or 0.05%, from the previous Friday. AI and semiconductor stocks attracted buying on the strength of U.S. semiconductor stocks at the end of the previous week, but the market was subsequently pushed lower by profit-taking. The decline in South Korea's KOSPI, which has a high weighting of semiconductor stocks, also weighed on the market.
The Nikkei had risen for 5 consecutive sessions through the 25th, gaining nearly ¥3,000 over that period. Expectations that strong AI demand would lead to earnings growth supported buying, but selling was also likely after the index had rapidly tested a recovery. In the domestic bond market on the morning of the 28th, long-term interest rates approached 3.1%, while the yield on 2-year Japanese government bonds, which is more sensitive to monetary policy rates, rose to its highest level in 31 years and 6 months. With the Nikkei trading near its highs, selling emerged as investors became increasingly aware of the relative expensiveness of equities amid persistent expectations of higher interest rates.
The strong uncertainty surrounding the situation in the Middle East also cooled investor sentiment. According to Reuters, Iranian state media reported on the 27th that Iran's military was prepared for the possibility of another U.S. attack. It was also reported that U.S. President Donald Trump had rejected Iran's new proposals on the 26th concerning the reopening of the Strait of Hormuz and an end to the fighting. In trading during the morning of the 28th Japan time, New York crude oil futures rose to the $93-per-barrel range, making Japanese stocks more difficult to buy.
The Nikkei briefly rose above the ¥67,000 level in morning trading for the first time in a month and a half, since 18 August. The SOX ended 1.41% higher on the previous day in U.S. stock trading on the 25th, prompting initial buying of AI and semiconductor stocks such as SoftBank Group and Advantest in the Tokyo market and pushing the Nikkei higher.
The 28th was the final cum-rights trading day for interim dividends and shareholder benefits for companies with fiscal years ending in March. Buying by individual investors seeking dividend rights was also likely to support the market, particularly in high-dividend-yield stocks such as banks.