Nikkei Rises as AI Buying Returns and BOJ Rate-Hike Bets Build
Tokyo stocks rose on August 10, with the Nikkei 225 closing at 66,376.25, up 1.2%, as investors bought electronics, metals and artificial intelligence-related shares, while fresh signs of a more hawkish Bank of Japan debate kept attention on the yen, bond yields and the timing of the next rate increase. (News On Japan)
On August 10, Tokyo stocks climbed as investors favored electronics, metals, and artificial intelligence-related shares. The Nikkei 225 ended the day at 66,376.25, a 1.2% increase, while the TOPIX rose 0.63% to 4,100.61. The broader market's recovery followed weaker U.S. labor data, which reduced expectations for another near-term Federal Reserve rate increase, supporting risk appetite and helping lift technology shares. The weaker dollar also provided some support to the yen.
Investors were more selective in their return to the AI trade, focusing on companies tied to semiconductors, electronic components, optical fiber, data centers, and power infrastructure. Companies like Ibiden, Furukawa Electric, and Sumitomo Metal Mining experienced gains, reflecting renewed demand for AI-related components.
The AI trade is becoming more diversified, with investors distinguishing between chipmakers, equipment suppliers, component makers, and infrastructure companies. Electronics and metals led the advance, with Furukawa Electric and Fujikura becoming important names in the second wave of AI stocks. These companies are seen as essential to data-center expansion, with investors paying more attention to suppliers that help connect processors, memory, and power systems in high-performance computing equipment.
While the technology sector was the primary focus, the broader TOPIX gain showed that other sectors, such as banks, materials, machinery, and selected domestic-demand shares, also benefited from the rally. Financial shares remained tied to the Bank of Japan's (BOJ) expectations, as higher rates could support bank lending margins and investment income, although rapid moves in bond yields could lead to valuation losses.
The BOJ's next communication was a key focus, with market expectations that it could raise rates again as early as September. The central bank maintained its policy rate at 1% at the July meeting, but three board members supported a faster or more flexible pace of rate increases to prevent inflation from overshooting the 2% target.
The BOJ's policy rate at 1% and the yen's strength near 157.88 to the dollar were the main factors shaping Tokyo trading. For exporters, a stronger yen could provide some relief, but import-dependent companies still face high costs for fuel, food, materials, and consumer goods.
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