TOKYO - Tokyo stocks fell sharply on October 13, with the Nikkei 225 closing at 67,778, down 1,253 points, as selling in artificial intelligence and semiconductor-related shares dragged the headline index below 68,000 after a three-day holiday weekend.
The broader TOPIX rose 5.86 points to 4,110.67, creating a striking split between the two benchmarks. While the Nikkei suffered its fourth straight decline, the wider market was firmer, with 1,140 Prime Market stocks rising, 380 falling and 32 unchanged.
The contrast showed that the day’s selloff was concentrated in a narrow group of high-priced Nikkei components tied to AI, semiconductors and electronic parts. Across the market as a whole, buying interest remained stronger than the headline Nikkei decline suggested.
Prime Market trading value reached about 7.964 trillion yen, while volume totaled about 2.356 billion shares. The heavy turnover reflected active repositioning after the long weekend, sharp moves in global technology stocks and renewed concern over the durability of the AI trade.
The Nikkei opened lower at 68,565, down 466 points, after U.S. semiconductor shares weakened during Tokyo’s three-day break. Selling intensified quickly, with the index falling more than 1,300 points in early trading and later dropping close to 2,000 points at one stage.
The benchmark recovered part of the decline in the afternoon but was unable to regain the 68,000 level. The late rebound showed that dip-buying remained present, but the overall tone was cautious as investors reduced exposure to crowded AI-related positions.
The selling followed weakness in U.S. chip stocks and a sharp regional selloff in South Korea, where the Kospi tumbled more than 6%. Investors were shaken by concern that Chinese memory-chip maker ChangXin Memory Technologies may be closing the technology gap with global rivals, raising questions over future margins in the AI semiconductor supply chain.
The concern hit memory and AI-related shares across Asia. Investors who had treated AI suppliers as one of the most powerful trades of the year became more selective, questioning how long today’s exceptional profits and margins can last if competition increases and funding costs remain high.
Tokyo Electron, Advantest, Kioxia Holdings, Kokusai Electric, Lasertec, Murata Manufacturing, Taiyo Yuden, TDK, Screen Holdings, Ibiden, Fujikura and Furukawa Electric were all closely watched as investors reassessed Japan’s exposure to the global AI buildout.
Tokyo Electron came under heavy pressure as semiconductor-equipment shares were sold. The company remains central to Japan’s role in global chip production, but its valuation makes it vulnerable when investors question capital spending, margins or the pace of AI investment.
Advantest was another major drag. The chip-testing equipment maker has been one of Japan’s clearest beneficiaries of demand for advanced AI processors, but its large Nikkei weighting means that selling in the stock can quickly pull down the index.
Kioxia Holdings also weakened as memory-related shares came under renewed scrutiny. The company remains tied to high-bandwidth memory, AI servers and data-center storage demand, but the latest concern over Chinese competition made investors more cautious toward memory-cycle winners.
SoftBank Group remained a key focus because of its exposure to OpenAI, Arm, robotics, data centers and large-scale artificial intelligence investment. The company has become Tokyo’s most visible proxy for global AI sentiment, and any shift in investor confidence toward AI infrastructure spending quickly affects its share price.
The broader AI trade is not broken, but it has entered a more demanding phase. Investors are no longer buying every company with AI exposure. They are now judging earnings visibility, power constraints, debt funding, valuation, competitive pressure and the ability to monetize AI investment.
The selloff also reflected a wider reassessment of capital costs. Reuters reported that credit investors have become more selective toward AI-related debt, while large AI-linked companies are facing greater scrutiny over whether returns will justify the scale of data-center spending.
This matters for Japan because many of the country’s strongest market themes are tied to the AI supply chain. Semiconductor equipment, memory, chip testing, optical fiber, power systems, electronic components and data-center infrastructure have all helped support the Nikkei this year.
The October 13 session showed the risk of that concentration. Even with most Prime Market stocks rising, heavy declines in a small group of AI and semiconductor names were enough to pull the Nikkei down by more than 1,200 points.
That split was also visible at the sector level. Nonferrous metals, electrical machinery, information and communications, metal products, and glass and ceramics were among the weaker areas in early trading, while marine transport, insurance, banks, securities and mining showed relative strength.
Banks and insurers benefited from the higher-rate environment and from rotation out of expensive growth shares. The Bank of Japan raised its policy rate to 1.25% in September, and investors continue to expect the central bank to keep policy on a gradual tightening path.
Higher interest rates can improve lending margins and investment returns for financial companies. Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, Mizuho Financial Group, Resona Holdings, regional banks and insurers remain important gauges of the market’s rate-normalization trade.
However, higher rates are a challenge for technology and growth shares. They raise the discount rate applied to future earnings and make investors less willing to pay high valuations for companies whose profits depend heavily on future AI demand.
The yen remained weak around 158 to the dollar, despite the BOJ’s September rate hike. That level continues to support exporters by increasing the yen value of overseas earnings, but it also raises the cost of imported energy, food, raw materials and consumer goods.
The weak yen is one reason the TOPIX held up better than the Nikkei. Exporters and value shares can benefit from currency weakness, while AI-heavy Nikkei components are more exposed to global technology sentiment.
For households, however, the weak yen remains a burden. Import costs are still high, and consumers continue to face elevated prices for groceries, gasoline, electricity, transport and services.
Japan’s wholesale inflation data kept pressure on the BOJ. Reuters reported that wholesale inflation remained elevated in September, with chemical goods up 13.3%, plastic products up 12.8% and nonferrous metal goods up 40.2% from a year earlier. Those figures showed that firms still face strong cost pressure from the weak yen, geopolitical risks and AI-related demand.
The BOJ is watching whether those wholesale price increases pass through to consumer prices. Governor Kazuo Ueda has said the timing and pace of future rate hikes will depend partly on whether cost pressure spreads more broadly and affects household consumption.
The central bank’s October 29-30 meeting is now a major focus. The BOJ will release fresh growth and inflation forecasts, and markets will look for signals on whether another rate increase is likely before the end of the year.
The household inflation survey added to the policy pressure. The BOJ said 88.6% of households expect prices to rise over the next year, while 86.5% expect prices to rise five years from now. Even though the one-year figure fell from the previous survey, inflation expectations remain deeply embedded.
That creates a difficult backdrop for policymakers. The BOJ wants to prevent inflation from overshooting its 2% target, but further rate increases could pressure equities, mortgage borrowers, corporate financing and government debt-servicing costs.
Japanese government bond yields remain central to the market. The 10-year JGB yield has recently stayed near levels not seen since the 1990s, while super-long yields remain under scrutiny because of fiscal concerns and large government borrowing needs.
Higher yields support financial shares but weigh on growth shares. They also increase the government’s debt-servicing burden, complicating Prime Minister Sanae Takaichi’s efforts to support households, expand defense spending and fund long-term strategic investment.
The government’s industrial strategy remains focused on semiconductors, artificial intelligence, energy security, defense, shipbuilding, robotics, space and other strategic sectors. That agenda supports many of the companies that have led the Nikkei this year.
But the October 13 selloff showed that government support and long-term demand are not enough to protect AI-related stocks when investors begin questioning valuations and returns.
Oil prices also weighed on sentiment. Brent crude traded near $105.90 a barrel as investors watched Middle East and Russia-Ukraine risks. For Japan, high oil prices are especially damaging because the country imports most of its energy.
Higher oil feeds into gasoline, electricity, aviation fuel, shipping, logistics, chemicals and manufacturing costs. When combined with a weak yen, it can quickly revive imported inflation pressure.
This is the main risk for households and companies. Wage growth has improved, but another rise in fuel and import costs would reduce real purchasing power and force companies to decide whether to raise prices again or absorb lower margins.
Companies with pricing power, strong brands, stable demand or exposure to long-term investment remain better positioned. Firms without pricing power face greater risk if wages, energy, logistics and borrowing costs rise while consumers resist further price increases.
The global backdrop was also fragile. Reuters described the latest AI selloff as a sign that the trade of the past several years is shifting into a new phase, with investors focusing more on monetization, returns on invested capital and the cost of funding.
That does not mean the AI investment cycle is over. Demand for chips, memory, optical fiber, power systems, data centers and software remains significant. But markets are becoming less forgiving, especially when competition rises and bond yields remain high.
South Korea’s selloff was particularly important for Tokyo. Overseas investors increasingly treat Japanese chip-equipment makers, South Korean memory producers, Taiwanese foundries and U.S. AI shares as a single global technology trade. When Seoul falls sharply, Tokyo’s semiconductor complex usually comes under pressure.
At the same time, the TOPIX’s resilience suggested that investors are not abandoning Japanese equities as a whole. The move into banks, insurers, shipping and other value-oriented shares showed that money was rotating rather than simply leaving the market.
This rotation will be critical in the days ahead. If TOPIX continues to hold firm while the Nikkei corrects, the market may be able to absorb AI-related selling. If weakness spreads from semiconductors into financials, exporters and domestic-demand shares, the correction could deepen.
The Nikkei’s technical picture has weakened. The index has now fallen for four straight sessions and has lost momentum after reaching above 70,000 earlier this month. The break below 68,000 is a warning sign, especially after the index failed to sustain earlier highs.
The next support area is around the mid-67,000 range, followed by the lower 67,000s. A sustained break below that zone could invite more profit-taking, while a rebound above 68,000 would suggest that dip-buyers are still active.
The 70,000 level remains the key psychological barrier. The Nikkei briefly recovered that level earlier this month, but the latest decline shows that the market has not yet built a stable base there.
The TOPIX is now the healthier index to watch. Its gain on October 13 suggests that broader Japanese shares still have support, even as the Nikkei is hit by AI-related volatility. Continued TOPIX strength would help limit concern over a broader equity-market reversal.
What to watch next: whether the Nikkei can regain 68,000, whether TOPIX can keep rising, and whether selling in Tokyo Electron, Advantest, SoftBank Group, Kioxia and other AI-linked shares begins to stabilize.
Investors will also monitor South Korea’s Kospi, the Philadelphia Semiconductor Index, U.S. technology shares, Chinese memory-chip developments and any further signs that AI infrastructure spending is slowing or becoming harder to finance.
The yen near 158 to the dollar remains the most important domestic signal. A move toward 160 would support exporters but revive intervention and inflation concerns. A rebound toward 155 or lower would ease import costs but could pressure exporter earnings.
Oil prices are another key risk. Brent near $106 keeps pressure on Japan’s inflation outlook, trade balance, households and corporate margins.
The BOJ’s October meeting will also grow in importance. Markets will look for whether the central bank signals that underlying inflation has reached its 2% target and whether it is preparing for another rate hike in the coming months.
October 13 showed that Tokyo’s market is no longer moving as one. The Nikkei was hit hard by a sharp reassessment of AI and semiconductor stocks, but TOPIX rose as investors bought banks, insurers and other value shares. The next phase will depend on whether Japan’s market can rotate successfully away from overheated AI names, or whether the selloff in technology begins to drag down the broader economy and investor confidence.
