Topix index ends at record high after US CPI release

On Thursday, Tokyo stocks experienced a significant surge, culminating in the Topix index reaching a record high after the release of the U.S. CPI data for July. The 225-share Nikkei Stock Average soared by 784.53 points, or 1.16%, bringing the index to 68,308.59, up from Wednesday's close. The broader Topix index also gained, with a rise of 37.04 points, or 0.89%, to close at 4,176.04, having briefly touched an intraday peak of 4,185.68.

The Prime Market saw the strongest gains among the top-tier stocks, with sectors such as banking, glass and ceramics, and electric appliances leading the charge. The U.S. dollar remained relatively stable, fluctuating within a narrow band around the 159 yen mark in Tokyo, as the market digested the inflationary data from the U.S. The euro was quoted against the dollar and Japanese yen at various intervals throughout the day.

The yield on the 10-year Japanese government bond increased by 0.020 percentage points from the previous trading session, partly due to speculation that the Bank of Japan may raise interest rates in September or October. This positive sentiment was fueled by the expectation that the Federal Reserve would not raise interest rates in September, following a slowdown in U.S. economic growth for the second consecutive month, as indicated by the July nonfarm payrolls report.

Heavyweights in the technology sector, such as Advantest and Tokyo Electron, were among the top gainers, supported by the reassurance that U.S. markets would not witness immediate rate hikes. Investors remained cautious, with trading activity tapering off in the afternoon as they awaited the release of the U.S. Producer Price Index.

Economic indicators are expected to be released by the end of this month and early next month, with expectations of a potential shift in the Federal Reserve's rate hike plans providing a favorable environment for the stock market, according to Maki Sawada, strategist at Nomura Securities Co.