Nikkei Falls 0.6% as Mideast Tensions Weigh on Tech Stocks
The Nikkei 225 declined 0.59% to ¥38,720 on Thursday as escalating Middle East tensions and a weakening yen near 40-year lows created a mixed backdrop for Japanese equities, with technology stocks bearing the brunt of selling pressure while financials found support.
The USD/JPY pair strengthened to ¥163.09, hovering near multi-decade highs as geopolitical uncertainty bolstered demand for the dollar. The weak yen provided some tailwinds for Japan’s export-heavy sectors, though concerns about imported inflation and potential Bank of Japan intervention tempered enthusiasm among investors.
Geopolitical Risks Drive Market Sentiment
Overnight developments in the Middle East dominated market sentiment, with reports of Houthi attacks on Saudi tankers in the Red Sea and the US military completing its 12th consecutive night of strikes on Iran. Oil prices climbed to six-week highs as shipping risks escalated through critical maritime chokepoints, raising concerns about global supply chain disruptions and inflationary pressures.
The heightened geopolitical tensions particularly weighed on technology and growth-sensitive stocks. SoftBank Group led decliners with a 2.70% drop to ¥2,791.86, while industrial giant Daikin Industries fell 2.63% to ¥2,695.48. Pharmaceutical heavyweight Takeda also retreated 2.09% to ¥2,665.46, reflecting broader risk-off sentiment among institutional investors.
Financial Sector Provides Market Support
In contrast to the tech selloff, Japan’s major financial institutions posted solid gains as investors positioned for potential monetary policy shifts. Mizuho Financial Group surged 1.35% to ¥1,659, while Mitsubishi UFJ Financial climbed 1.31% to ¥3,540.78. Sumitomo Mitsui Financial Group also advanced 0.62% to ¥4,120.64, benefiting from expectations of higher interest rates and improved net interest margins.
The financial sector’s outperformance reflects growing market speculation that the Bank of Japan may need to act more aggressively to defend the yen, particularly as USD/JPY approaches levels that historically trigger intervention. Kyocera emerged as the session’s top performer, gaining 1.80% to ¥3,649.8, supported by its diversified technology portfolio and strong overseas earnings exposure.
BOJ Policy Outlook Remains Key Focus
With the next Bank of Japan meeting scheduled for April 28, 2026, market participants are closely monitoring Governor Ueda’s communications for signals about future policy direction. Current expectations favor a hold at existing rates, though the central bank’s tone regarding US-China tariff uncertainties and domestic inflation pressures will be crucial for yen direction and equity market sentiment.
As Japanese markets navigate the complex interplay of geopolitical tensions, currency volatility, and monetary policy expectations, Thursday’s session highlighted the ongoing rotation from growth stocks toward value plays and rate-sensitive sectors. The resilience of financial stocks amid broader market weakness suggests investors are positioning for a potentially more hawkish BOJ stance, even as global uncertainties continue to challenge risk appetite across Asian equity markets.
This article is for informational purposes only and does not constitute investment advice. Past performance does not guarantee future results. Investors should conduct their own research and consider their risk tolerance before making investment decisions.