The Japanese stock market declined sharply as tech stocks led a broad sell-off, driven by concerns over global semiconductor demand and AI competition. Currency movements added to market volatility, while financial and retail stocks provided some stability amid cautious sentiment.
Nikkei tumbles as tech stocks sink
Japan’s Nikkei 225 index fell 2.67% on Monday, closing at 39,288.15, as major technology stocks tracked the global decline in semiconductor shares.
The index reached an intraday low of 38,883.15, indicating sustained selling pressure throughout the session.
Japan’s chip-related shares tumbled as Chinese AI startup DeepSeek gained traction, raising concern the app will threaten US’s tech leadership https://t.co/jzuAX5HcxV
The downturn followed a significant 9.2% slump in the U.S. Philadelphia Semiconductor Index (SOX), driven by investor concerns over increasing competition from Chinese AI technologies, which rattled global tech markets.
Tech stocks lead declines amid semiconductor weakness
In Japan, semiconductor-related stocks bore the brunt of the sell-off. Advantest (6857), a leading chip-testing equipment manufacturer, plummeted 10%, marking the steepest decline among Nikkei components.
Tokyo Electron (8035), a chip-making equipment firm, also fell 5.3%, while SoftBank Group (9984), a tech-focused investment giant, dropped 6%, further dragging down the index.
The sell-off was triggered by Chinese AI startup DeepSeek’s launch of an advanced AI assistant, which utilises more cost-effective chips with lower data requirements. This development sparked fears of a reduced demand for high-end semiconductors, impacting investor sentiment.
Meanwhile, the yen strengthened by nearly 1% against the US dollar, reaching its highest level since mid-December. A stronger yen reduces the profitability of exporters when earnings are repatriated, further weighing on stocks with significant global exposure.
Technical analysis
The Nikkei 225 is currently trading at 39,288, consolidating after recent market turbulence. The index remains below its 5-day moving average at 39,772, signalling mild downward pressure in the short term.
Japan’s Nikkei 225 stabilises near 39,288 after sharp sell-off, as seen on the VT Markets app.
The 20-day moving average at 39,406 suggests a neutral to slightly bearish medium-term outlook, while the 50-day moving average at 39,233 indicates lingering bullish sentiment, as the index still holds slightly above this level.
However, the MACD trend points to bearish momentum, with the signal line remaining below the MACD line and a negative histogram reinforcing a cautious market tone.
BOJ policy impact and financial sector support
Kazuo Kamitani, a strategist at Nomura Securities, noted that the Nikkei’s decline echoed market movements observed after the Bank of Japan’s (BOJ) rate hike in July. However, he suggested that the relative resilience of the US economy and the BOJ’s less aggressive policy stance could help limit further downside.
Despite the pressure from global tech volatility and yen strength, financial stocks and retail sector gains may provide some support, potentially cushioning the market from deeper losses in the near term.
