Japan's Nikkei share average surged 4% to 64,362.02 on Friday, marking a significant rally from Thursday's performance of 0.81%. According to Reuters, the index soared as much as 5.7% during intraday trade before settling at the 4% close. The Topix index also advanced 1.83%, reflecting gains across several sectors. This represents a substantial improvement from Thursday's divergent trend where the Nikkei rose 0.81% while Topix fell 0.81%, with the current session showing broad-based buying in Japanese equities driven by global technology optimism.
Advantest shares jumped 15.7% following strong global AI momentum, with the chip-testing equipment maker emerging as one of the day's strongest performers. As reported by Business Standard, the rally was triggered by Microsoft's stronger-than-expected sales and cloud computing forecast, which reassured investors that demand for AI-related services remains robust. Advantest raised its annual operating profit forecast by 35%, driven by strong demand for AI chip-testing equipment, demonstrating the company's confidence in sustained AI infrastructure growth. SoftBank Group, a major investor in AI-focused startups, surged nearly 14% as investors increased exposure to the sector. The positive sentiment spread to other technology and AI-related companies, with Panasonic emerging as one of the day's strongest performers, surging 19.5% to its daily limit after raising its profit outlook.
The banking sector faced significant selling pressure, with Mitsubishi UFJ Financial Group losing 2.58% and Sumitomo Mitsui Financial Group falling 1.8%, according to The Economic Times. This decline contributed to the broader Topix index's underperformance despite the Nikkei's gains. As per Business Standard, Mitsubishi UFJ, Toyota Motor, and Fast Retailing ended the day lower, with financial and consumer stocks also underperforming. The divergent performance between technology and banking stocks highlights the current market trend where AI-related shares are experiencing strong demand while traditional value sectors face selling pressure.
Currency movements had mixed impacts on the market, with Japan's intervention to support the yen on Thursday, which drove the currency sharply higher against the US dollar, having limited influence on the broader equity market. However, exporters, particularly automakers, came under pressure as a stronger yen reduces the value of overseas earnings when converted back into Japanese currency. Toyota Motor fell 1.9% and Honda Motor declined 2.7%, making automakers among the weaker performers despite the broader market rally. As reported by Reuters, the Bank of Japan's policy decision had little lasting impact on market sentiment, with the central bank keeping interest rates unchanged while maintaining its guidance that it intends to continue gradually tightening monetary policy amid persistent inflation risks.
On the policy front, the Bank of Japan kept its benchmark interest rate unchanged at 1%, in line with market expectations, following a 25-basis-point rate hike in June. According to Business Standard, the decision leaves borrowing costs at their highest level since 1995. The strong finish capped a session dominated by renewed optimism over AI-related growth, with Japanese technology shares benefiting from improved global risk appetite and robust expectations for continued investment in artificial intelligence. Other technology stocks, including Tokyo Electron, Kioxia Holdings, SoftBank Group, Fujikura and Lasertec, also posted strong gains, as reported by Business Standard, with the positive outlook boosting investor confidence in companies linked to the global AI supply chain. The current market trend represents a typical pattern where AI-related shares are strong while value shares such as banks are sold off, reflecting the ongoing market preference for companies positioned to benefit from artificial intelligence adoption.
