Nikkei Reclaims 66,000 as Nvidia Caution Keeps Trading Thin

Tokyo's Nikkei 225 index rebounded on August 26, closing at 66,262.16, up 405.73 points or 0.62%, driven by selective buying of semiconductor and financial shares as traders awaited Nvidia's earnings and navigated uncertainties around AI valuations and the yen. The broader TOPIX rose 17.35 points, or 0.42%, to 4,111.02, further showing resilience.

Prime Market breadth was positive, with more stocks rising (976) than falling (515) or remaining unchanged (59), but gains represented only around 63% of the market, indicating selective buying rather than aggressive participation. The index initially slipped into the mid-65,000 range before recovering as the South Korean Kospi strengthened and semiconductor-related stocks attracted buybacks.

Trading volume was notably low, with Prime Market trading value dropping below 7 trillion yen for the first time since April 21, showing many investors stayed on the sidelines before Nvidia's results and upcoming U.S. economic data. Buybacks in AI-related names and strong financial shares supported the market, but investors avoided making major directional bets.

Nvidia's upcoming earnings were the key overseas event for Tokyo's semiconductor and AI trade, with investors seeking confirmation of demand for AI processors and infrastructure. Japanese companies linked to the AI supply chain, such as Advantest, Tokyo Electron, Kioxia Holdings, SoftBank Group, Fujikura, and others, heavily influenced the index's performance.

The rebound in South Korean shares and resilient financial stocks helped the market's firmer tone, while the yen hovered around 159 to the dollar, weakening from its late-July lows but still keeping inflation and currency risks on traders' minds. The Bank of Japan maintained its policy rate at 1% at its July 30-31 meeting, but hinted at potential future hikes due to inflation concerns, with the September 17-18 meeting becoming the next major policy event.