Japanese shares staged a strong recovery on Thursday, with the Nikkei 225 rising 1% to 65,982.49 and the broader Topix gaining 0.91% to 4,048.72 at the midday break. According to Reuters, the rally was supported by improving investor sentiment after measures by the U.S. Treasury to stabilise the bond market triggered a sharp decline in U.S. yields and revived demand for riskier assets. The U.S. Treasury said overnight it would double the size of its buybacks of long-duration debt, helping push U.S. yields lower and easing pressure across global bond markets. Market breadth was firmly positive, with 175 stocks advancing on the Nikkei 225, compared with 48 decliners and two unchanged, indicating broad-based investor confidence in the recovery.
Japanese government bonds experienced significant gains as the U.S. Treasury's intervention provided relief to global debt markets. The benchmark 10-year JGB yield fell 5.5 basis points to 2.835%, while the 20-year yield declined 8.5 basis points to 3.690%, according to The Economic Times. The five-year JGB yield declined 3 basis points to 2.090%, retreating from a record high reached earlier in the week. Strong demand at a 20-year bond auction offered further support, with the ratio remaining above its average level over the past year, suggesting continued investor interest in Japanese long-duration debt despite recent yield volatility. Japan's 10-year government bond yield also eased to around 2.84%, after touching a 30-year high of 2.95%, as reported by Business Standard.
While technology stocks had led the previous session's decline, the semiconductor sector showed mixed performance in the latest rally. On the downside, Rohm fell 3.88%, while Ibiden and Sumco declined 3.40% and 3.18% respectively, indicating that concerns over higher government spending and the growing possibility of a near-term Bank of Japan rate hike continue to weigh on chip-related stocks. However, the broader recovery provided relief to technology-related shares that had been under pressure from rising long-term interest rates and stretched valuations. The decline in interest rates provided a broad boost to Japanese equities, with stocks and sectors that had lagged the recent rally in artificial intelligence and semiconductor-related shares showing stronger gains.
Among major gainers, Kioxia Holdings rose 6%, SoftBank Group gained 3.1%, Toyota Motor advanced 4.3%, Nintendo climbed 2.4%, and Advantest added 1%, according to Business Standard. Sumitomo Metal Mining was the top percentage gainer on the index, climbing 9.72%, followed by Sumitomo Pharma, which rose 8.70%. Kansai Electric Power advanced 8.09%, putting the stock on track for its biggest one-day gain since August 2024. This diversification beyond the previous technology-focused gains suggests that investors are now seeking opportunities across different sectors as global bond market conditions improve.
Japan's trade deficit widened sharply in July as imports jumped to a record high, mainly due to higher crude oil purchases, as reported by Business Standard. Exports remained strong, helped by solid demand for AI-related chips, indicating that while Japan faces increased import costs, its technology sector continues to benefit from global artificial intelligence demand. This trade dynamic adds another layer of complexity to Japan's economic outlook, with the country facing higher energy costs while benefiting from strong demand in high-tech sectors.
