nikkei plunges 600 yen: us tech slump and strong yen rattle tokyo market
Tokyo, Tuesday, 25 February 2025.
tokyo’s nikkei average index faced a steep decline, plummeting 600 yen due to a confluence of factors. a downturn in us technology stocks, mirrored by the nasdaq and philadelphia semiconductor index (sox), coupled with a strengthening yen, has put significant pressure on semiconductor-related stocks like tsmc. the strong yen is impacting investor sentiment, particularly towards export-oriented companies such as toyota, as it raises concerns about declining export profitability.
initial market reaction
The Nikkei Stock Average started the day with a sharp drop, trading in the late 38,100 yen range, approximately 600 yen lower than the previous Friday [1]. This downturn reflects broad selling across various sectors, triggered by the decline in US technology stocks and the strengthening yen against the dollar [1]. The technology-heavy Nasdaq Composite index fell by 1.21%, while the Philadelphia Semiconductor Stock Index (SOX) decreased by 2.59% [1]. These movements in the US markets have significantly influenced the sentiment of investors in Tokyo [1].
semiconductor stocks take a hit
Semiconductor-related stocks are experiencing considerable pressure, mirroring the performance of their US counterparts [1]. Concerns about potential oversupply in artificial intelligence (AI) related capital expenditures have led to significant declines in companies like Nvidia and Broadcom in the US market [1]. In Tokyo, major semiconductor stocks, such as Advantest and Tokyo Electron, are facing early selling pressure, contributing to the overall decline of the Nikkei average [1]. Investors are closely watching these stocks, as they are bellwethers for the technology sector’s health [1].
yen appreciation impacts exporters
The yen’s appreciation to near 150 yen against the dollar is adding further strain on the market [1]. This shift in the exchange rate raises concerns about the export profitability of Japanese companies. Toyota, among other automobile manufacturers, is facing selling pressure as investors anticipate a potential decrease in overseas earnings due to the stronger yen [1]. The Topix index is also experiencing a decline, reflecting the widespread impact of these factors on the broader market [1].
mixed performance among individual stocks
While Fast Retailing and SoftBank Group are declining, some stocks are showing resilience [1]. Chugai Pharmaceutical, Canon, and Nitori Holdings are among the companies experiencing gains [1]. Notably, trading company stocks, including Mitsubishi Corp, are being bought following Warren Buffett’s expression of interest in expanding investments in the sector [1][7]. Mitsubishi Corp saw a surge, temporarily exceeding an 8% increase [7]. Other general trading companies like Itochu and Mitsui & Co are also experiencing significant gains [7].
market sentiment and future outlook
The Nikkei’s decline reflects a cautious market sentiment influenced by external factors such as US tech stock performance and currency exchange rates [1]. The index is expected to face downward pressure, potentially reaching around 38,000 yen, a level approximately 700 yen lower than the closing value of 38,776 yen before the three-day weekend [2]. Investors are closely monitoring these dynamics, balancing concerns over tech stock valuations and currency impacts with opportunities in sectors like trading companies [7].