- The tech-heavy Nikkei 225 Stock Average dropped as much 3.9% as of 9:19 a.m. Tokyo time, its steepest decline since March 30.
- The broader Topix gauge slid as much as 2.4%, with electric appliances and machinery the biggest drags.
- Japanese stocks slumped, led by declines in tech shares, after strong US jobs data fueled expectations that the Federal Reserve will keep rates higher for longer, sparking a selloff in the AI sector.
- Equities came under further pressure after Iran fired several rounds of missiles toward Israel, exacerbating tensions in the Middle East as the US pushes to preserve a faltering ceasefire.
Japanese stocks experienced a significant downturn on Monday, with the Nikkei 225 index falling by 3.9%, its sharpest decline since March 30. The drop was fueled primarily by a selloff in technology shares, which included notable losses for companies such as SoftBank Group Corp. and Kioxia Holdings, both of which plunged over 10% in morning trading.3
This turmoil comes on the heels of strong US jobs data that has raised expectations surrounding the Federal Reserve's intent to maintain higher interest rates for an extended period. Analysts believe this climate has pushed investors to seek safety in more defensive sectors. “Selling is expected to spread across Japanese technology shares,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Intelligence Lab.
Additionally, tensions in the Middle East escalated as Iran launched several missiles toward Israel, intensifying fears that the conflict could disrupt regional stability. This has compounded negative sentiment in financial markets already rattled by domestic developments. The broader Topix gauge also felt the impact, declining 2.4% with electric appliances and machinery among the sectors most affected.2
While Japanese firms have benefited from a tech boom this year, their gains pale in comparison to South Korean counterparts, with Kioxia seeing an increase of over 600% through last Friday. The Nasdaq 100 and Philadelphia Semiconductor Index similarly experienced sharp declines of about 5% and 10%, respectively, influencing Japanese stocks' downward spiral.
“The Nikkei 225 slipped 3.9% amidst a tech selloff driven by strong US jobs data and rising tensions in the Middle East. Concerns over high valuations and the sustainability of the AI rally are weighing heavily on investor sentiment.”
